Rates Rise From Record Lows

The 30-year fixed-rate mortgage averaged 5.95% during the week ending Jan. 10, up a bit from last week’s 5.85%, the lowest 30-year since Freddie Mac began tracking it in 1971. Last year at this time, the 30-year was 7.06%.

Nationally, the 30-year was highest in the North Central states at 6.06%, and lowest in the West at 5.89%, according to Freddie’s weekly survey.

The average for the 15-year was 5.33%, up from last week’s average of 5.24%. A year ago, the 15-year averaged 6.55%.

One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 4.03% this week. This was slightly lower than last week’s 4.06% ARM, and quite a bit lower than the 5.26% average from the same time last year.

“In spite of the sluggishness in the economy, nearly 25% of all outstanding mortgages were refinanced in 2002, saving those homeowners an average $1,200 per year to spend or save as they see fit,” said Frank Nothaft, chief economist at Freddie. “And with interest rates as low as they currently are, refinancing will continue to be a viable option for some.”

The Mortgage Bankers Association of America (MBA) reported an increase in mortgage applications for the week ending Jan. 3. The index, which was adjusted for the New Year’s holiday, came in at 1182.3. That number is a 24.3% increase from the previous week’s index of 950.9. The application index, which reports a week behind Freddie’s rate survey, came in at 570.7 during the same time last year.

Refinancing activity represented 77.8% of total applications, increasing from 75.9% the previous week, the MBA reported.

“The refinance boom that began in the first week of 2001 is still going strong in 2003,” MBA economist Phil Colling said. “Also, since we began the week with interest rates at record lows, many homeowners who had been waiting for lower rates to refinance were most likely spurred to action.”

This week’s panel of mortgage experts on Bankrate.com’s weekly survey said they think mortgage rates are headed south again.

A 60% majority said rates will go down over the next 30 to 45 days, 20% said rates will increase, and 20% said rates will remain unchanged, within 2 bps.

“Slow recovery and instability of the job market will keep rates low,” said Todd Brown, executive vice president of Patriot National Bank in Melville, N.Y., who voted in the survey that rates will drop. “Treasuries will continue to trend lower until uncertainty in the market and Iraq stabilizes.”

At late morning Friday, the 10-year Treasury note’s yield was unchanged from yesteray’s close at 4.17%, with the price unchanged at 98 20/32.