Freddie reports 20 basis point jump in 30-year rates
By ANNE LINEBERRY
8/8/2003

Mortgage application activity edged up for the week ended August 1, after two weeks of slowing down.

In its Weekly Mortgage Applications Survey, the Mortgage Bankers Association of America (MBA) reported a Market Composite Index of 983.2, up 1.1 percent compared to the prior week on a seasonally adjusted basis. Three weeks ago, the index was 1284.3. The index finished down 6.9 percent from a year ago.

The refinance index and the government index decreased, while the conventional and purchase indices were up slightly, the survey said. Refinances fell 2.1 percent as a share of total applications, finishing the period at 58.3 percent, according to the data.

"The relatively modest drop in refinancing activity despite a rather sharp increase in interest rates indicates some borrowers decided this might be their last change to refinance before rates went up further," said Jay Brinkmann, MBA’s vice president of research and economics.

At Bankrate.com, 50 percent of the industry experts forecasted that rates would head back down from their six-week straight upward trajectory. Thirty-three percent think rates will continue to spiral upward, with 17 percent predicting a leveling off in the short term.

Greg McBride, a Bankrate.com financial analyst, sees rates continuing skyward.

"Rates could suddenly jump like a spooked horse, so lock on any dips or periods of rate stability," he quips on their website.

Fannie Mae's chief economist thinks rates may head downward in the near future.

"As investors regain their perspective and look more to the economic fundamentals and less to the technicals, it would not be surprising if long-term rates come down a bit in the weeks ahead," David W. Berson said in his weekly commentary for the secondary lender.

Treasury yields fell off a bit this week compared to last week's 4.40 close for the 10-year bond. Wednesday's close was 4.26 and yields closed Thursday at 4.22.

For now, however, Freddie Mac is reporting an average of 6.34 percent for the 30-year fixed rate, up 20 basis points over last week's 6.14 percent. This bounce marks the seventh straight week of climbing rates for the 30-year fixed, according to statements from Freddie.

The 15-year rate leapt skyward as well, averaging 22 basis points higher than last week's average. The 5.66 percent rate marks the eighth straight week of gains for the fixed rate, Freddie's statements said.

The company's Primary Mortgage Market Survey said that both rates carried 0.7 discount points.

The 30-year average fixed rate is at its highest since August 2, 2002; the 15-year fixed rate is at its highest since October, 2002, the survey said.

Freddie's chief economist believes that rates jumped upward on news of higher bond yields.

The one-year Treasury-indexed adjustable-rate mortgages (ARMs) jumped 12 basis points for the week, averaging 3.80 percent this week. The one-year ARM also carried 0.7 basis points. This time last year, the rate for the one-year ARM was 4.37 percent.

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