Rates Ease, So Do Apps

The average 30-year fixed rate mortgage fell four basis points from last week to 6.22%, according to Freddie Mac’s Primary Mortgage Market Survey for the week ending December 29. A year ago, the 30-year was 5.81%.

The average 15-year fell three basis points this week to 5.76%, Freddie reported.

“Lower figures for the recently released Producer Price Index and Consumer Price Index and lower, but still strong, gross domestic product combined with the seasonal slowdown in the housing market led to another decline in mortgage rates this week,” said Freddie economist Amy Crews Cutts in the statement.

The hybrid five-year ARM averaged 5.79%, according to Freddie’s survey, off three basis points.

The one-year ARM averaged 5.15%, down seven BPS, the survey said. The one-year’s index, the one-year Treasury bond, was 4.35% Tuesday, according to the Federal Reserve.

What has recently caught the interest of bond market watchers is the difference between short-term yields, like the 1-year Treasury, and long term yields, as reflected in the 10-year Treasury — which, at 4.39% on Thursday, is only four BPS higher than the one-year. Should the phenomenon of an inverted yield curve, where short-term rates are higher than long-term rates, occur, experts are mixed about whether this is an indication of an upcoming recession.

Disregarding the prior week’s rate decline, mortgage shoppers completed 7% fewer 1003 applications, according to the Mortgage Bankers Association’s latest Weekly Mortgage Applications Survey. Driving the decline were refinance applications, which reportedly fell 11%, while purchase applications were off 5%.

MBA said refinances accounted for 40% of the latest week’s activity, off from 42% the previous week, and ARMs remained at a 33% share.