Falling rates may hold steady
By SAM GARCIA
2/25/2002

Mortgage rates dipped last week, according to real estate finance giant Freddie Mac. In its weekly survey of thrifts, commercial banks and mortgage lending companies, Freddie said that the average 30-year fixed rate mortgage (FRM) fell five basis points (BPS) from last week to 6.81 percent.

During last November, the 30-year fell to 6.45%.

Freddie said the average fifteen-year FRM fell seven BPS to 6.28%, its lowest point in three months. The spread between the 15-year and the 30-year rose to 0.53% from 51 BPS last week.

HSH Associates attributed the falling rates to a renewed "flight-to-quality" buy of Treasuries, as concerns about corporate accounting led investors to safer places to park their money. HSH said that rates improved despite reports about a strengthening economy.

The one-year adjustable rate mortgage (ARM) continued improving, with the average falling two BPS from last week to 4.96%.

According to the majority of mortgage bankers, mortgage brokers and other industry experts surveyed by Bankrate.com, rates won't move more than 2 BPS in either direction during the next 30-45 days.

Bankrate.com's financial analyst, Greg McBride said, "accounting jitters are keeping a lid on rates, even as the economy continues to strengthen. Barring a sudden end to the accounting storm, rates will stay in a narrow range."

Freddie's chief international economist, Robert Van Order, doesn't see rates increasing; "with inflation coming in at a very tame rate of about 1.1 percent year-over-year, the prospect of higher mortgage rates is dim indeed."

A business-investment index created by G7 Group, Inc., a New York economic- and political-consulting firm, indicated that business investment still is contracting sharply, according to the Wall Street Journal. Princeton University professor Alan Blinder, a former vice chairman of the Federal Reserve Board and one of creators of the index, was quoted as saying, "I have been an optimist for the last few months, and this piece of information tempers that optimism." The story went on to say the index contradicts Fed reports, which aren't necessarily compiled using figures on gross domestic product as G7's index is.

While rates have been improving during the past few weeks, applications fell again, led by refinances. Applications for refis fell nearly ten percent from the prior week, according to the Mortgage Bankers Association of America's (MBA) weekly survey of mortgage bankers, commercial banks and thrifts. MBA said

A year ago -- when fixed rates were around 36 BPS higher than now -- refinance applications were 21.7% higher than MBA's most recent report.

Purchase applications were down almost eight percent from last week, and overall applications were down almost nine percent. Government applications were down nearly 12%.

Article © MortgageDaily.com All Rights Reserved