Rates May Rise

Mortgage rates, refi apps see little change from last week
By SAM GARCIA
3/5/2002

Fixed rates edged down last week, with the average 30-year fixed rate mortgage (FRM) improving one basis point (BPS) from last week to 6.80%, according to Freddie Mac. The government sponsored housing enterprise reported in its latest weekly survey of 125 thrifts, commercial banks and mortgage lending companies that the average fifteen-year FRM was unchanged from the prior week at 6.28%.

Freddie said the average one-year adjustable rate mortgage (ARM) fell 2 BPS to 4.94%. Last week, the Federal Home Loan Bank of San Francisco announced that the monthly weighted average cost of funds index (COFI) fell again in January to 2.823%, down from 3.074% in December.

"Gross Domestic Product (GDP) figures released today showed the fourth quarter to be stronger than expected, adding momentum to the economic recovery," Robert Van Order, Freddie Mac's chief international economist said last week. "However, Fed Chairman Alan Greenspan says the recovery will be sluggish, creating no upward pressure on interest rates."

A year ago, fixed rates were about a quarter percent higher than this week, and the 1-year ARM was nearly 1.50% higher.

The majority of mortgage bankers, mortgage brokers and other residential mortgage industry experts surveyed by Bankrate.com expect for rates to increase more than 2 BPS during the next 30-45 days.

"A prevailing wait-and-see attitude among investors means mortgage rates remain in a narrow range for now," said Bankrate.com's financial analyst, Greg McBride. "However, the risk of waiting is that rates will inevitably rise."

HSH Associates said that "borrowers should start expecting higher rates" according to its survey of 2,000 lenders. In its weekly commentary, HSH said, "based upon Friday's bond market washout, we expect that we'll see an average close to 7% for the week ahead."

Applications saw little change in activity as the Mortgage Bankers Association of America (MBA) reported that overall applications were nearly 4% higher than last week. MBA reported in its survey of mortgage bankers, commercial banks and thrifts that refinance applications fell about a third of a percent while purchase applications were up almost nine percent. Refinance applications continue to represent a smaller portion of overall applications.

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