Another Wave?

Apps strengthen, rates drop
By ANNE LINEBERRY
5/9/2003

Mortgage loan applications took a leap this past week and may be headed even higher.

The seasonally-adjusted Refinance Index finished up a almost a thousand points, to 6077.8 for the week ended May 2, industry analyzers reported. The Weekly Mortgage Application Survey is published by the Mortgage Banker's Association of America (MBA) and reveals application activity and rate fluctuations.

For the last few months, analysts have been cautionary in their forecasts, noting the uncertainties in the world markets over the Iraq war. The haze is clearing, and now, according to the Wall Street Journal, a market strategist at J.P. Morgan expects next week's Refinance Index to jump 25 percent and keep climbing up towards 9000 in the weeks ahead.

As a share of all activity, refinancing edged up slightly over the prior week, garnering 68.7 percent of the application market. Overall, the share of refinance applications continue to slide from mid-March's record 80.5 percent, according to available MBA data.

The MBA report also announced a record high Purchase Index, 416.0.

An MBA economist pointed to two variables likely responsible for the surge in the already booming industry: an upswing in consumer confidence and historically high activity in the late spring.

Adjustable-rate mortgages (ARMs) remain unattractive, only managing to capture only 13.1 percent of total market activity, down from 14.3 percent the previous week, the report said. This in spite of the fact that the average one-year Treasury-indexed ARM continued its decline, averaging 3.66% for the week, down from 3.74% a week ago, according to Freddie Mac's weekly rate survey.

In all MBA Weekly Mortgage Application Surveys this year to date, ARMs as a percentage of mortgage activity have only risen above 15 percent one week, back in mid-April. For 2002, the MBA noted that ARMs on average totaled 17 percent of the mortgage market.

Fixed-rate mortgages stumbled downwards, with the 30-year average reported at 5.62%, down 8 basis points and the 15-year rate reported at 4.97%, down from 5.03% last week.

Almost half the analysts for Bankrate.com expect rates to slide. Another third see the FRM remaining stable.

Freddie predicts that rates will hover around 5.8 percent for the year, but rise toward year's end. The 5.8 prediction in May is off 20 basis points from April's prediction of 6.0.

The 10-year Treasury Note closed Thursday at 99 8/32, down 6/32. The yield closed at 3.72%.

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