Activity unchanged from prior week
By CHRISTY ROBINSON
1/17/2003

Mortgage rates and the mortgage application index remained almost unchanged this week but turned their faces in opposite, unfavorable directions.

According to the Mortgage Bankers Association of America's (MBA) weekly index, applications took a 2.4% fall to 1154.3 for the week ending January 10, compared with last week's 1182.3. During the same time last year, the seasonally-adjusted index came in at 581.7.

Refinancing activity represented 77.7% of total applications, decreasing slightly from 77.8% the previous week, the MBA survey found.

On the rise, Freddie Mac's weekly survey revealed the average 30-year fixed-rate mortgage to be 5.97% for the week ending Jan. 17. That's higher than last week's 5.95% and the 5.85% record low the week before. However, it's still lower than the 6.83% average during the same time last year.

Nationally, the 30-year was highest in the North Central states again at 6.07%. The West and Southwest tied for the lowest 30-year at 5.93%.

"Mortgage rates were largely unchanged this week, amid a sobering December jobs report and growing tensions in the Mid East and the Korean peninsula. Disappointing retail sales, a struggling manufacturing sector, and mild business investment are all holding mortgage rates in the 6% range," said Frank Nothaft, chief economist at Freddie.

Mortgage rates should hover around their current levels, and 2003 should be another strong housing market year, Nothaft said.

The 15-year averaged out at 5.36% this week, up from last week's 5.33%. Last year at this time, the 15-year was 6.31%. One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 4.03%, unchanged from last week. The ARM averaged 5.08% during the same time last year.

Half of mortgage experts polled on Bankrate.com's weekly panel said they expect rates to head south over the next 30 to 45 days. The other half was split: 25% predicted rates to increase, and 25% predicted rates to remain unchanged, within 2 bps.

"Risk is for a stock rally that would doom our rates. Lock soon," said Brian Peart, president of Nexus Financial Group in Atlanta, a panel member who predicted rates would rise.

Fannie Mae released a more favorable duration gap Wednesday: -5 from the +2 in November. But the news failed to spur an appreciable rally, stated Kurt B. Harrison from Banc of America Securities, in U.S. Treasury Market commentary. A removal of the war premium, strong equity earnings over the next few weeks, and improving economic data in the first quarter could all act individually or collectively to push Treasury yields sharply higher, and this seems to be the trade most market participants are waiting for, he said.

At Friday near midday, the 10-year Treasury note's yield decreased to 4.01% from yesterday's close, with the price increasing to 99 29/32.

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