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Mortgage Market Movement Mired

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Interest rates rose, refinance share fell and loan activity deteriorated this week. Meanwhile, mortgage shoppers are more likely to choose the one-year adjustable-rate mortgage over its fixed-rate counterparts as the spread continued to widen.

Rising 13 basis points from last week and 34 BPS from last year, the average 30-year fixed-rate mortgage was 5.21% in Freddie Mac’s Primary Mortgage Market Survey for the week ended April 8. It was the highest the 30-year has been since the week ended Aug. 13, 2009.

Also 13 BPS higher over the past seven days was the average 15-year fixed-rate mortgage, which landed at 4.52%, Freddie reported.

Frank Nothaft, Freddie’s chief economist, said mortgage rates followed bond yields higher as U.S. employment strengthened. In the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended April 2, MBA executive Michael Fratantoni pointed to the Federal Reserve’s completion of its mortgage-backed securities purchase program.

The yield on the 10-year Treasury bond closed today at 3.91%, higher than 3.89% last Thursday, according to the U.S. Department of the Treasury.

Panelists surveyed by Bankrate.com for the week April 8 to April 14 offered little guidance about where mortgage rates are headed — with more than a third predicting rates will rise at least 3 BPS during the next week or so, and the rest evenly split about whether rate will fall or remain unchanged.

Rising even more was the 5-year Treasury-indexed hybrid ARM, which increased 15 BPS from a week earlier to 4.25% in Freddie’s survey.

But the one-year Treasury-indexed ARM increased just 9 BPS to 4.14% in Freddie’s survey, pushing the spread between it and the 30-year to 1.07% from 103 BPS a week earlier — the widest its been since its stood at 108 BPS on Oct. 16, 2008. The one-year was also lower than 4.83% a year ago.

The underlying one-year Treasury bill yield closed at 0.46% today, surging from 0.42% last week, according to data from the U.S. Department of the Treasury. The six-month London Interbank Offered Rate was 0.45% yesterday, 0.04% higher than the prior week, Bankrate.com reported.

In the MBA’s survey, ARM activity climbed to 6.2% from the prior week’s 5.2%.

The Mortech-MortgageDaily.com Mortgage Market Index for the week ended April 7 fell to 226 from last week’s 237. The average U.S. mortgage amount was $203,241, lower than $206,249 a week earlier. Washington, D.C.’s, $333,506 average loan amount was higher than any state, while Nebraska’s $150,516 was the lowest.

MBA’s data indicated loan applications were 11% lower last week on a seasonally adjusted basis than the week before. Purchase activity was a hair higher, but refinances tumble 17%.

Refinance share fell to one-third from 37% in the previous Mortgage Market Index report. The rate-term share was 21%, while the cashout share was 11%.

In MBA’s report, which reflected data that are a week older, the total refinance share fell to 59% from 63%.

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