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| Led by growing demand for refinance loans as some mortgage rates fell to the lowest level in more than two years, mortgage application volume rose to the highest level in almost four years. But industry insiders project the low rates won’t last for long.
At 5.69% this week, the 30-year fixed-rate mortgage spiraled down 18 basis points from a week ago and 54 BPS below the level a year ago, according to Freddie Mac’s survey of 125 mortgage-lending companies, thrifts and commercial banks for the week ending today. The 15-year reportedly averaged 5.21% — 22 BPS better than last week. The 30-year and 15-year are at their lowest since July 2005, Freddie said. Their benchmark, the 10-year Treasury yield was 3.62% in noon trading today, sliding 26 BPS from last week, according to CNNMoney.com. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.40%, sinking 23 BPS within the past seven days, Freddie said. Meanwhile, the 1-year Treasury-indexed ARM fell 11 BPS to 5.26% this week. Even with the decline, it is the first time in seven years it has been higher than the 15-year, Freddie noted. The 1-year Treasury bill itself fell 18 BPS in a week to 2.86% on Wednesday, U.S. Treasury data showed. The 6-month London Interbank Offered Rate, which competes for ARM applications, was 3.83% as of yesterday — 50 BPS lower than a week earlier, according to Bankrate.com. ARM applications accounted for about 9% of total applications for the week ending Jan. 11, barely changed from the level in the previous week, the Mortgage Bankers Association reported on Wednesday. “Mortgage rates moved down across loan products for the third consecutive week,” Freddie Chief Economist Frank Nothaft said in an announcement. “The latest retail sales report indicated that shoppers scaled back spending in December, as retail sales declined by 0.4 percent from November’s level,” he added. “Particularly weak were sales of building materials, garden equipment and supply stores, which fell by 2.9 percent from the previous month. The declines aggravated concerns about the well being of the economy and exerted downward pressure on mortgage rates.” Nonetheless, MBA’s January forecast has the 30-year averaging 6.1% for the quarter. Though higher than the current level, the trade group expects the average to move up to 6.2% until the fourth quarter. The mortgage industry insiders surveyed this week by Bankrate.com seem to agree on the upturn, as 62% believe mortgage rates will rise over the next 35 to 45 days, while only about one-quarter think rates will fall and 15 percent forecast they’d remain relatively unchanged. The Market Composite Index, a measure of mortgage application volume, soared 28% over the previous week to 906.4 — the highest its been at since reaching 1012.9 in the week ending April 2, 2004, an MBA spokeswoman said. The weekly upturn resulted from a 43% surge in refinance requests and 11% improvement in purchase money application demand. The share of refinance applications increased to nearly 63% from about 58% the previous week, MBA reported. |
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