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Activity on ARMs, Refis Rise

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Activity on ARMs, Refis RiseAverage 30-year fixed rate 6.05%

May 8, 2008

By SAM GARCIA

A slight increase in fixed rates along with a slight decrease in adjustable-mortgage rates helped push ARM share higher. But refinance applications surged — pushing overall applications higher.

Freddie Mac reported the 30-year fixed rate averaged 6.05% for the week ending May 8, 1 basis point lower than a week earlier. A year ago, the 30-year average was 6.21%.

The 15-year average was up 1 basis point from last week to 5.60%, Freddie said.

The 10-year Treasury yield, a benchmark for fixed-mortgage rates, was 3.80 early today, climbing from 3.71% seven days earlier, according to CNNMoney.

Better-than-expected economic data offset weak housing prices to keep rates from moving much, Freddie Chief Economist Frank Nothaft explained in the report.

“Job losses lessened in April and conditions in both the manufacturing and service industry outperformed market forecasts,” Nothaft said. “Worker productivity also rose in the first quarter as increases in labor costs diminished.”

Mortgage rates are headed higher, according to 63 of the 100 “mortgage bankers, mortgage brokers and other industry experts” surveyed by Bankrate.com for the week May 8 to May 14. But 21 projected rates will fall by at least 2 BPS during the next 35 to 45 days, while the rest forecast no change.

The average 5-year Treasury-indexed hybrid adjustable-rate mortgage was 5.67%, down from 5.73% last week, according to Freddie’s survey.

The 1-year Treasury-indexed ARM averaged 5.29%, the same as last week, Freddie said. The 1-year Treasury itself yielded 1.94% yesterday, climbing from 1.85% a week earlier, U.S. Department of Treasury data indicated.

The London Interbank Offered Rate was 2.88% this week, falling from 2.99% last week, Bankrate.com reported. LIBOR, along with the 1-year Treasury, is used as and index for ARMS, which accounted for 7% of all applications tracked by the Mortgage Bankers Association for the week ending May 2. The ARM share rose from 6% the prior week.

MBA said total mortgage applications jumped 16% from a week earlier, with the seasonally-adjusted Market Composite Index ending the week at 655.4. The jump in overall 1003s was fueled by a 19% increase in refinances, which accounted for 47% of the latest activity compared the 46% the previous week.

Applications for home purchases were up a seasonally-adjusted 12%, while government applications were 13% higher, MBA reported.

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