Mortgage Market Weaker

The 30-year fixed-rate mortgage averaged 6.18%, up 5 basis points from a week ago but 4 BPS below the average a year ago, Freddie Mac said its latest Primary Mortgage Market Survey showed. This is the third consecutive week the 30-year has increased.

“Mortgage rates edged up over the week following news of a jump in consumer spending in November,” said Frank Nothaft, Freddie chief economist, in a written statement. “Financial markets were concerned that stronger spending could keep inflation elevated. These worries were further compounded by the releases of new and existing home sales for the same month, which both exceeded market forecasts and caused Treasury bond yields to continue to rise.”

The 10-year Treasury note yielded 4.70% near midday — 15 BPS higher than the level reported for Thursday afternoon a week ago.

Over the next 35 to 45 days, mortgage rates will fall, according to 43 of the 100 mortgage “experts” Bankrate.com surveyed this week. Twenty-nine of the panelists think rates will rise and 28 foresee rates remaining relatively unchanged.

Fannie Mae sees the 30-year averaging 6.24% this quarter, dropping to 6.06% in the first quarter 2007 and ending next year at 6.08%. Meanwhile, Freddie and the Mortgage Bankers Association see the average for this quarter around the same level as Fannie does, but both believe it will fall to 6.2% next quarter and respectively forecast it will rise to 6.4% and 6.5% by yearend 2007.

The 15-year averaged 5.93%, rising 4 BPS within the past seven days, Freddie said.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly averaged 5.98%, edging up 2 BPS from last week.

Up 3 BPS from a week earlier to 5.47% was the 1-year Treasury-indexed ARM average, Freddie reported. The index, or the 1-year T-bill, was 4.97% on Tuesday, only 1 BPS higher than a week prior, according to Federal Reserve data.

During the week before Christmas, demand for mortgage loans fell 14%, as refinance requests plunged 19% from the prior week and purchase money loan application activity dropped 11%, MBA announced on Wednesday.

The refinance share of mortgage applications decreased from the previous week to 49% and the ARM share of activity ticked down to 23%, MBA added.