Rates bounce back, Freddie says
By ANNE LINEBERRY
8/22/2003

Pointing to last week's blackout as a possible contributor, the Mortgage Bankers Association of America (MBA) reported another decrease in applications for mortgage financing for the week ended August 15.

MBA's Market Composite Index of mortgage loan applications was 736.7 on a seasonally-adjusted basis, the group said. The index is 10.7 percent smaller than the prior week, as reported in the Weekly Mortgage Applications Survey.

"One factor that no doubt negatively affected mortgage applications last week was the blackout in the Northeast that shut down many mortgage offices for at least a day. Unfortunately the nature of our data is such that we cannot estimate the magnitude of the impact," said Jay Brinkmann, MBA's vice president of research and economics.

The industry organization reported a slowdown in all types of applications. The refinance index in particular fell dramatically, finishing 14.9 percent off from the prior week. The purchase index was down 4.9 percent, the government index was off seven percent and the conventional index closed down 11 percent, MBA said.

Rates, after taking a dip last week, headed back upward, Freddie Mac said.

The 30-year fixed rate averaged 6.28 percent, up four basis points over the prior week, according to the secondary lender. At this time last year, the 30-year averaged 6.27 percent.

In its latest forecast, MBA predicted the 30-year rate would average 6.2 percent for the quarter.

In its Primary Market Mortgage Survey, Freddie reported the 15-year fixed rate as averaging 5.60 percent, up two basis points for the week. It's still lower than this time last year when the 15-year averaged 5.71 percent. Both the 30- and 15-year rates carried 0.8 discount points.

Higher rates could have contributed refinances continuing to shrink as percentage of total applications. MBA said that for the week ended August 15, refinances comprised 53.4 percent of applications, down from 55.8 percent the previous week.

Refinancing volume has taken such a nosedive lately that MBA has revised its prediction for yearly production volume downward in its latest statement.

Some positive economic news may cause rates to continue skyward. Frank Nothaft, chief economist for Freddie, mentioned in his weekly commentary that single-family housing starts have hit their highest annualized level since 1978. This development, Nothaft says, has builders confident about a strong housing market.

At Forbes.com, other good news on the economic front was reported, including falling jobless claims and a leap in mid-Atlantic manufacturing.

"It bodes well for the recovery we've been looking for," said William Cheney, chief economist at John Hancock Financial Services, to Forbes.

The publication noted that, "These latest data offered evidence that the U.S. economy is poised to spring from months of sluggishness, but also augurs higher inflation and interest rates that could hurt bonds."

The 10-year Treasury yield was 4.47 percent at close of business Thursday, almost the same as last week's 4.48 percent close.

The one-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 3.84 percent for the week, Freddie said. In 2002 this week, the rate averaged 4.34 percent.

Bankrate.com's financial analyst Greg McBride believes rates will continue upward, short-term.

Article © MortgageDaily.com All Rights Reserved