Refi's Jump

Rates creep up
By SAM GARCIA
3/8/2002

Applications for refinance mortgage loans jumped 22% from last week, according to the Mortgage Bankers Association of America (MBA). In its weekly survey of mortgage bankers, commercial banks and thrifts, MBA said that overall applications were up nearly 15%.

The current level of refinance applications is 10 percent lower than a year ago.

MBA reported that refinance applications made up 51.7% of all applications compared to 48.6% last week, while adjustable rate mortgage applications made up 13.2% of total applications, down from 14.6%.

"Last week was the first time since the week ended January 25 that fixed mortgage rates have increased, though last week's increase was small," stated Phil Colling, an economist with the Mortgage Bankers Association. "We often see refinance activity increase in a week with increased mortgage interest rates. That is possibly attributable to consumers perceiving that rates have bottomed and are heading back up."

Freddie Mac reported in this week's survey of 125 lenders that the average 30-year fixed rate mortgage (FRM) rose seven basis points (BPS) to 6.87 percent. While the southwest saw the biggest increase -- 13 BPS -- the 30-year FRM was still lowest in that region, at 6.83 percent.

"Mortgage interest rates edged up over the end of last week and into this week as early economic indicators suggest the economy is expanding and will cause the Federal Reserve Board to raise rates later this year," said Frank Nothaft, Freddie Mac's chief economist. "Last Friday, the fourth quarter Gross Domestic Product was revised upward, from 0.2 percent growth to a 1.4 percent gain. Both consumer spending and personal income were higher than expected in January, while purchasing managers indicated a jump in the service industry."

Freddie reported that the average 15-year FRM was up 9 BPS to 6.37 percent. The spread between the thirty-year and the fifteen-year narrowed to 1/2% from 52 BPS last week. A year ago, the spread stood at 0.45%.

The average 1-year adjustable rate mortgage (ARM) jumped 13 BPS to 5.07 percent. The spread between the one-year ARM and the thirty-year FRM fell to 1.80% from 1.86% last week. A year ago, the spread was only 0.68%.

Most of Bankrate.com's mortgage experts surveyed think rates will not fall during the next 30-45 days. Respondents include mortgage bankers, mortgage brokers and other industry experts who provide residential first mortgages to consumers.

"Positive economic news may finally be tipping the scales toward higher rates," said Greg McBride, financial analyst for Bankrate.com.

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