Apps up as ARM reaches record low
By CHRISTY ROBINSON
1/31/2003

Mortgage applications went up and the 30-year remained almost flat, but the one-year adjustable-rate mortgage (ARM) reached a record low last week.

Applications rose to 1171.2 for the week ending Jan. 24, according to Mortgage Bankers Association of America's (MBA) weekly index. The seasonally-adjusted number compares with 1100.3 the previous week and 538.9 during the same time last year.

Compared with 50.3% last year, refinancing activity represented 75.4% of total applications last week. It remained almost unchanged from the week before.

The 30-year fixed-rate mortgage also remained almost unchanged at an average 5.90% for the week ending Jan. 31, according to Freddie Mac's weekly rate survey. The 30-year was 7.02% at the same time last year. The survey reports one week ahead of MBA's application index. Nationally, the 30-year was highest in the North Central states at 6.00%, and the lowest was in the Western states at 5.83%.

The 15-year averaged 5.28%, a small drop from last week's 5.31% but more than a point lower than last year's 6.51%.

The one-year Treasury-indexed ARM averaged 3.89% this week, which is the lowest since Freddie began tracking it in 1984. At the same time last year, the ARM averaged 5.12%.

What mortgage rates will do next depends on which way the Iraq saga turns, according to Freddie's chief economist.

"Mortgage rates are currently in a kind of limbo with no impetus to drive the figures either up or down," said Frank Nothaft. "Risks seem to be pretty evenly balanced at this juncture in time. The upside risk would be rapid economic growth and inflation while the downside might be extended hostilities in the Mideast, or a wider scope of weakness in the economy."

The mortgage experts polled in Bankrate.com's weekly survey echoed that assessment. While more than one-third said rates will go down over the next five weeks, a majority 67% said they will remain unchanged, within 2 bps. None said that rates would increase.

"The bias will probably be to hold rates steady, but any war-related or economic surprises will cause them to rise a bit," said CFP Jason P. Flurry of Planmark Captial Management, LLC, in Alpharetta, Ga., to Bankrate.com. "I think lenders are pretty hesitant to lower rates much more right now with so much uncertainty surrounding us."

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