Mortgage Market Rebounds

Rates tumbled across the board, according to Freddie Mac. In its Primary Mortgage Market Survey of 125 lenders, the average 30-year fixed rate mortgage fell 28 basis points (BPS) from the prior week to 6.16%. The 30-year, however, was just 2 BPS less than the same time last year.

The movement in rates was attributable to the August jobs report, Freddie’s chief economist said.

The average 15-year fixed rate mortgage fell 31 BPS to 5.46%, Freddie reported, while the average 1-year Treasury-indexed adjustable rate mortgage (ARM) fell 11 BPS to 3.87%.

The bigger improvement in fixed rates drove ARM activity down. The Mortgage Bankers Association of America (MBA) reported that the share of applications for ARMs fell to 21.6% from 23.3% last week.

MBA surveys mortgage bankers, commercial banks and thrifts. In its Weekly Mortgage Applications Survey, which was released Wednesday, MBA reported that loan applications increased by 22.8% from the prior week. The jump was the result of a 45.5% increase in refinance applications. Refinances represented 55% of total applications, according to the survey.

Even with jump in refinance applications, “this week’s refinance index level was less than one-third of the level experienced at the height of the boom in early June,” said Doug Duncan, MBAs chief economist.

Bankrate.com reported that 42% of the mortgage bankers, mortgage brokers, and other industry experts it surveyed expect rates to fall, while a third expect rates to increase and a quarter see no changes.

“Lock on the dip,” said Bankrate.com’s financial analyst. “As time passes and economic fundamentals begin to improve, a resumption of the trend toward higher mortgage rates is likely to emerge.”

In its September economic forecast, Freddie said it expects the 30-year to average 6.5% over the fourth quarter and 6.7% in 2004.

The 10-year Treasury Note yield closed Thursday at 4.31%, while the price closed at 99.46875.