ARM Below 5%

Fixed rates fall, refis jump
By SAM GARCIA
2/15/2002

The average adjustable rate mortgage (ARM) fell below five percent for the first time since April 1994, according to Freddie Mac's survey of thrifts, commercial banks and mortgage lending companies. The government sponsored housing enterprise reported this week that the one-year ARM was 4.98%, six basis points (BPS) lower than the previous week. The average ARM bottomed out in February 1994 at 4.20 percent.

A year ago, the 1-year ARM was 6.40%.

Reflecting an increasingly attractive ARM rate and an uncertain outlook for fixed rates, ARM activity edged up this week. The Mortgage Bankers Association of America (MBA) reported that ARM applications represented 15.6% of overall applications, compared to 15.5% last week and 7.7% a year ago.

MBA, which says its survey of mortgage bankers, commercial banks and thrifts covers approximately 40 percent of all U.S. retail residential mortgage originations, reported that refinance applications jumped 13.3%. A year ago, refinances were 24% higher than reported this week.

Purchase applications fell 7.7% from last week, but are more than thirteen percent higher than a year ago, according to MBA's survey. A recent report by Computer Business Methods, Inc., or CBMI, indicated that Wells Fargo Mortgage was the top purchase lender last year with $74.5 billion in production.

MBA said that overall applications were 2.5% higher than last week but seven percent less than the same week last year.

Freddie reported that the average 30-year fixed rate was 6.86%, down from 6.88% last week. The 15-year average edged down 1 BPS to 6.35 percent.

Commenting on recent activity, Freddie Mac chief economist Frank Nothaft said, "Quiet financial markets this week left mortgage rates low and almost unchanged from last week's figures." Nothaft said he expects originations of about $1.4 trillion this year.

Forty-two percent of the first mortgage bankers, brokers and other industry experts surveyed by Bankrate.com this week expect rates to increase more than 2 BPS during the next 30-45 days. The remaining respondents were evenly split between unchanged rates and falling rates.

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