Apps fall and rate outlook unclear
By ANNE LINEBERRY
5/2/2003

Mortgage interest rates managed to fall again, according to numbers released by Freddie Mac Thursday.

The company's Primary Mortgage Market Survey reported 30-year fixed rates at 5.7 percent, down from 5.79 percent a week ago and down from 6.78 this time last year. Fifteen-year fixed rates were down slightly too, at 5.03 percent compared to 5.12 percent last week and 6.26 percent last year. One-year adjustable rate mortgages fell to 3.74 percent, down from 3.79 percent last week and 4.75 percent last year, according to the weekly report.

With rates scraping the cellar floor, refinancing activity remains high, snagging 68.4 percent of total applications for the week ending April 25, according to numbers released by the Mortgage Banker's Association of America (MBA).

"As a matter of fact, mortgage rates have fallen enough over the last few months that families who refinanced in 2001 are now able to do so again, according to the results of Freddie Mac's quarterly refinance review released yesterday," said Frank Nothaft, Freddie Mac chief economist.

The Market Composite Index of mortgage loan applications fell slightly, from 1055.8 a week ago to 1050.8 on a seasonally adjusted basis, according to the Weekly Mortgage Applications Survey of MBA. Numbers are still up more than 87 percent compared to last year.

Where the market is headed seems to be a tough question for analysts this week. Chairman of the Federal Reserve Board Alan Greenspan commented on the hazy nature of the current forecast in his opening statement to the House Committee on Financial Services.

"Unfortunately, the future path of the economy is likely to come into sharper focus only gradually. In the interim, we need to remain mindful of the possibility that lingering business caution could be an impediment to improved economic performance," he said. Household spending, he said, has begun to rise, indicating growing consumer confidence.

Greenspan also said that he believes the economy is positioned to "expand at a noticeably better pace than it has during the past year."

"Households, too, are likely to welcome lower energy bills and a continuation of favorable conditions in mortgage and credit markets," he said.

Mortgage experts surveyed by BankRate.com are divided. Almost half (42 percent) left their rate prediction at 'undecided.' Others split evenly, 29 percent seeing future rates rising, 29 percent forecasting lower rates.

At Freddie, Nothaft sees continued good times for the industry. "Given the current low rates and the robust level of housing construction," he said, "it appears the housing industry will continue to flourish well into the summer."

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