Sixth record low this year
By ANNE LINEBERRY
5/16/2003

Mortgage interest rates slipped again this week, hitting new lows, according to Freddie Mac's weekly report.

Frank Nothaft, chief economist for Freddie, noted that the rates mark the "sixth record low this year since the inception of Freddie Mac's Primary Mortgage Market Survey in 1971."

The survey reported 30-year fixed rates at 5.45 percent, down from 5.62 percent a week ago. Fifteen-year fixed rates followed suit, landing at 4.84 percent, down from last week's 4.97 percent. The average one-year adjustable rate mortgage (ARM) was down slightly as well, with the one-year Treasury ARM ending the week at 3.67 percent, according to the survey. All rates averaged less than one discount point, the report said.

"Continued reaction to last week's Federal Reserve Committee statements about the threat of deflation has triggered a rally in the bond market, driving long-term yields to the lowest level since 1958," said Freddie's Nothaft. "When that happens, mortgage rates are bound to drop."

The 10-year Treasury bill yield has plummeted this year, and could mark a new record low at closing today. Yields closed yesterday at 3.52 and were at 3.48 in midday trading Friday. According to historical charts available from the Federal Reserve Bank, rates are currently at at their lowest since 1962, when records became available. The note was trading at 100 29/32 midday Friday.

The steady tumbling in interest rates coincided with another hyperactive week for the industry. The Market Composite Index of mortgage loan applications for the week ending May 9 finished up at 1417.8 from 1246.6 on a seasonally-adjusted basis, according to the Weekly Mortgage Applications Survey of the Mortgage Bankers Association of America (MBAA). The report noted a slight slowdown in the purchase and government indices, offset by gains in the conventional index and the refinance index -- which itself was up nearly 20% -- all seasonally-adjusted.

Refinancing accounted for 72.4 percent of all applications, the report said. Doug Duncan, an economist for MBAA, noted that refinancing should continue to rally. "Some individuals who refinanced as recently as six months ago are finding it economically rational to refinance again," he said.

Bankrate.com's mortgage experts were a little bit more in agreement this week, with half predicting rates will continue to edge downward. A fourth predicted rates would remain level and the other 25 percent think rates will begin to rise.

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