30-year average 6.01%
By COCO SALAZAR
3/25/2005

Applications eased as inflation anxieties pushed the 30-year fixed rate over 6% for the first time since last summer. But the latest industry forecasts call for rates to settle where they are for a while.

The 30-year climbed 6 basis points from last week to an average of 6.01%, according to Freddie Mac's latest survey of 125 mortgage-lending thrifts, commercial banks and companies.

While the 30-year average has reportedly increased 44 BPS within the past six weeks, the latest forecasts by Freddie, Fannie Mae and the Mortgage Bankers Association of America indicate it will stabilize as they all have it averaging 6% next quarter. For the third quarter, the forecasts ranged from 6.0% to 6.3%.

The highest jump within the past week happened in 15-year average -- up 9 BPS to 5.56%, Freddie said.

The average for 5-year Treasury-indexed hybrid adjustable-rate mortgage reportedly rose 4 BPS to 5.35% this week.

Meanwhile, the 1-year Treasury-indexed ARM edged up 4 BPS also to 4.24%.

"Renewed concern over the threat of inflation pushed up long-term mortgage rates, while the most recent FOMC statement caused short-term rates to float upwards," commented Freddie chief economist Frank Nothaft in a prepared statement.

The Federal Open Market Committee raised its target for the federal funds rate Tuesday by a quarter percentage point to 2.75%, saying that "though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power is more evident." The move marks the seventh 25 BPS hike since last June.

Nearly three-quarters (72%) of Bankrate.com's panel of 100 mortgage "experts" believe rates will continue climbing over the next 35 to 45 days, while 14% foresee a downturn and the remaining 14% expect them to remain unchanged.

Rising rates reduced application activity by 10% -- pushing the Market Composite Index down to 658.8 for the week ending March 18, according to the MBA's latest survey of mortgage bankers, commercial banks and thrifts. A year earlier, the index measured 1114.9.

The overall weekly decline was particularly due to the 17% downturn in refinance requests and the 4% decrease in purchase money application activity contributed.

MBA noted that "refinance applications are down more than 60 percent relative to this time last year," when the 30-year was reportedly 61 BPS lower than its current average.

The share of refi applications declined from the previous week to below 40%, MBA said, but for ARMs, the share inched up to nearly 34%.

In early Good Friday trading, the 10-year Treasury note yield was up 2 BPS to 4.60%. The price was off 0.09 to 95.25.

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