Record rates, rising refis
By SAM GARCIA
8/9/2002

Fixed mortgage rates continued to decline to record low levels, while loan applications reached a record high. The fifteen-year continued to gain in attractiveness over the thirty-year. If rates decline any further, refinance application levels may eclipse their November records.

The thirty-year fixed rate fell to its lowest point in the past 32 years. In Freddie Mac's survey of 125 thrifts, commercial banks and mortgage lending companies, the average 30-year fixed rate mortgage was reported at 6.31%, down 0.12% -- or 12 basis points (BPS) -- from last week. The previous record was set two weeks ago when the average fell to 6.34%.

"Recent downward revisions of GDP for 2001 and first quarter 2002 suggest that the economy faces weak growth," said Freddie's chief economist, Frank Nothaft. "This led to anticipation that the Fed will reduce overnight interest rates by the end of the year, if not sooner."

With an even more impressive showing, the average 15-year fell 15 BPS from last week to 5.69%. The spread between the 30-year and the 15-year now stands at 62 BPS, the widest it has been since MortgageDaily.com began covering rates.

"Last week's reports that economic growth was weaker than expected had a negative impact on stock prices," said Phil Colling, an economist for the Mortgage Bankers Association of America (MBA). "This led many investors to pull out of stocks and invest more in bonds."

Loan application levels have reach a feverish pitch, with refinance apps threatening to break previous records. Loan originators report levels of activity that allow them only to spend time on the most promising applicants. MBA said loan applications, which were up more than six percent from the prior week, reached their highest level ever. The previous record was set in November 2001, when applications were one percent less than reported this week.

MBA surveys mortgage bankers, commercial banks and thrifts each week.

Refinance applications rose more than seven percent from last week, MBA reported, and are within eight percent of the record set last November. Refi applications made up 68.4% of total applications, up slightly from last week.

Purchase applications rose 3.74% from the prior week.

In a recent Wall Street Journal article, Goldman Sachs analysts reportedly said lower rates could spark "the mother of all refinance rallies."

Near midday today, the 10-year Treasury-note was up 22/32, with the yield at 4.31%, according to LionInc.com. Last Friday, the midday yield was reported at 4.32%.

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