ARM Movement Varies By Region

The 30-year fixed-rate mortgage average of 5.82% came in just 1 basis point (BPS) above last week’s average, while the 15-year edged up only 2 BPS to 5.21%, according to Freddie Mac’s latest survey of 125 thrifts, commercial banks and mortgage lending companies.

The short-term, or 1-year Treasury-indexed adjustable-rate mortgage (ARM) average reportedly climbed slightly higher — up 4 BPS to 4.05%. However, ARM averages had notable week-to-week changes regionally; in the Northeast, the ARM average jumped 12 BPS, in the West it rose 10 BPS, while plunging 15 BPS in the Southwest.

Freddie chief economist Frank Nothaft noted in a written statement that the lulled rates come “amid conflicting economic reports as to the strength of the economy.”

Among conflicting reports are those about home sales. While the U.S. Census Bureau issued data this week indicating new-home sales in July were much weaker than expected, the National Association of Realtors reported the third-best ever pace of existing-home sales in July.

Also aiding economic uncertainty was July’s payroll employment, which was weak for the second consecutive month as it reportedly rose by only 32,000 — 208,000 short of expectations. Next week’s release of the August employment numbers should impact the Fed’s anticipated short-term interest rate increase near mid-September.

Nonetheless, Nothaft forecasted “only a gradual rise in mortgage rates in the next few months.”

The majority, or 62%, of the panel at Bankrate.com also believe that rates will rise throughout the remainder of this quarter, a scant 13% predict a downturn and 25% predict rates will stay about the same (plus or minus 2 BPS).

While Freddie’s August outlook has the 30-year averaging 6.3% next quarter, the latest forecast of the Mortgage Bankers Association (MBA) has it much closer to the current level, at 6.0%.

The uptick in rates coincided with falling mortgage activity — as shown by the 6.3% drop in the seasonally adjusted Market Composite Index of 646.3, according to the MBAs latest Weekly Mortgage Applications Survey. The downturn was primarily driven by an 8.0% drop in refinancing activity as purchase money applications fell just 5.0%.

The refinance share of mortgage applications edged down to 40.4%, MBA said, and ARM activity slipped to 32.1%.

A year ago, the measure of mortgage application activity was below its current level, despite that the 30-year and the 15-year averages were about half a percentage point below their current mark and the ARM average was 21 BPS lower.

The 10-year Treasury note was trading early Friday at price of 100 4/32 and 4.22% yield, not much different from the 4.23% yield at last week’s close.