Rising Rates on Horizon

The 30-year fixed-rate mortgage averaged 6.43%, climbing 8 basis points from a week ago and up 50 BPS from a year earlier, according to Freddie Mac’s latest Primary Mortgage Market Survey.

The highest jump — up 10 BPS to 6.10% — this week reportedly occurred in the average for the 15-year. The jump trimmed the spread between the 15-year and the 30-year to 33 BPS.

The long-term mortgage rate gauge, the 10-year Treasury note yielded 4.89% at Thursday’s close, up 3 BPS from the market’s close a week ago.

“In the first quarter of 2006, it appears that economic growth picked up relative to the last three months of 2005,” said Frank Nothaft, Freddie’s chief economist, in the announcement. “There is concern that the continued high level of energy cost may lead to inflation in other sectors of the economy. And fear of inflation leads to higher mortgage rates, like the ones we see this week.”

The average for 5-year Treasury-indexed hybrid adjustable-rate mortgages came in at 6.11%, which Freddie said was 9 BPS higher than last week.

The smallest weekly increase — up 6 BPS to 5.57% — was reportedly seen in the average for 1-year Treasury-indexed ARMs. Meanwhile, the 1-year T-bill itself on Wednesday, at 4.82%, was 3 BPS higher than a week earlier, the Federal Reserve said.

“Our forecast for the year as a whole is for economic growth of 3.8 percent in 2006, above the 3.2 percent in 2005, which may warrant even more Fed rate hikes than previously expected,” Nothaft said. “If that is the case, mortgage rates may continue their gradual upward trend.“

The mortgage “experts” Bankrate.com surveyed this week seemed to agree, as 57 percent of the 100 panelists predicted rates would rise in the next 35 to 45 days, some 29 percent said rates would remain relatively unchanged, while the rest expect rates to drop.

Originators completed 7% more mortgage applications than in the previous week as purchase money loan applications jumped 8% and refinance requests increased 5%, the Mortgage Bankers Association reported.

While demand for refinances went up during the week, the refinance share edged down just below 37%, MBA said.

The ARM share was reportedly unchanged from the prior week at 29%.