Rates continue to rise as Refis continue to fall
By SAM GARCIA
12/21/2001

Applications for mortgage refinances tumbled for the fifth straight week, reaching pre-September levels. The Mortgage Bankers Association of America (MBA) said that refi applications fell almost twenty-eight percent from last week.

MBA also reported that overall applications were down 18.9%, with the decrease mitigated by a smaller drop in purchase applications, which fell only 6.5 percent. Conventional applications were down 20%, while government applications fell twelve percent.

MBA says that its survey of mortgage bankers, commercial banks and thrifts covers approximately 40 percent of all U.S. retail residential mortgage originations.

Driving down refinances were rising fixed rates; Freddie Mac reported that the average 30-year fixed rate mortgage (FRM) rose eight basis points (BPS) from last week to 7.17 percent. The thirty-year has not been this high since last July.

Freddie Mac's weekly survey of 125 national lenders includes thrifts, commercial banks and mortgage lending companies.

"Currently the market is focusing on an anticipated economic recovery within the next six months," said Freddie Mac's chief economist Frank Nothaft,. "That focus put some upward pressure on mortgage rates this week, causing them to rise. There remains a good bit of volatility, though, due to market speculation over exactly when and how strong the rebound will be."

Fixed rates were lowest in the Southeast, where the 30-year average stood at 7.14%, and highest in the North Central region, where the average thirty-year was reported at 7.26 percent.

Freddie reported that the average one-year adjustable rate mortgage (ARM) was up eight BPS to 5.27%. Reflecting rising fixed rates, MBA reported that ARM activity represented 13.5 percent of all mortgage applications, up from 11.6% last week.

Don't look for much direction in interest rates from Bankrate.com's "mortgage experts" this week; about a third see rates falling, while a similar proportion see rates unchanged and close to a third see rates rising more than 2 BPS from where there are now during the next 35-45 days.

Each week, Bankrate.com surveys more than 100 mortgage bankers, mortgage brokers and other industry experts who provide residential first mortgages to consumers.

"Be poised to lock on any dip in rates," said Bankrate's Greg McBride. The financial analyst, who thinks rates will rise, added "the trend is still higher, though rates continue moving two steps higher and one step back."

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