Applications edge down, MBA reports
By SAM GARCIA
9/5/2003

Mortgage rates, which have recently risen to their highest levels in more than a year, may have hit a ceiling for the moment.

The average 30-year fixed rate mortgage rose to its highest level since July 19, 2002, Freddie Mac reported. In its Primary Mortgage Market Survey released Thursday, the 30-year was up 12 basis points (BPS) from last week to 6.32%. A year ago, the 30-year was 6.15%, Freddie reported.

The average 15-year fixed rate came in a whopping 67 BPS under the 30-year at 5.77%, the survey said.

"The 10-year Treasury bond yields continue to climb, raising mortgage rates as they go," noted Freddie's deputy chief economist Amy Crews Cutts. "Also contributing to the current rise in rates is the growing number of favorable news reports about an upturn in economic growth."

In afternoon trading Thursday, the 10-year Treasury Note was yielding 4.51%, down 8 BPS from Wednesday's close. The price was up $0.65625 to 97 29/32.

Fifty percent of the mortgage bankers, mortgage brokers and other industry experts surveyed by Bankrate.com expect no changes in mortgage rates, while the other half was evenly split between rising (25%) and falling (25%) rates.

At least one Fed Governor thinks his agency should ease up on its monetary policy -- a signal that rates won't head higher in the short term.

"In my view, the Federal Open Market Committee has little reason to undertake significant tightening so long as inflation remains low and promises to remain subdued, as it does today," said Federal Reserve Board Governor Ben S. Bernanke in a prepared statement. He made his comments Thursday before the Bloomberg Panel for the Outlook on the U.S. Economy, in New York City.

"Indeed, I would argue that, in situations of considerable slack, growth that is generated solely by increased productivity, and that is unaccompanied by substantial employment growth, may possibly require monetary ease, rather than monetary tightening, in the short run."

The average 1-year adjustable rate mortgage (ARM) was reported at 3.98%, 10 basis points higher than the prior week but 37 BPS better than a year ago.

ARMs made up 23.3% of total applications, the Mortgage Bankers Association of America (MBA) reported, down from 24.4% the prior week.

In its Weekly Mortgage Applications Survey released Wednesday, MBA said total loan applications edged down slightly -- and for the fourth week in a row. Conventional applications were down slightly while refinance applications slid more than 8%. Refinances made up about 46% of all activity, down from almost 49% the prior week. Purchase and government activity was up slightly.

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