Rates to hover near current levels
By SAM GARCIA
11/26/2001

Mortgage Rates continued to climb from recent historic lows, with fixed rates jumping about a quarter percent, according to Freddie Mac's weekly rate survey. The average thirty-year fixed rate mortgage (FRM) rose 24 basis points (BPS) from last week to 6.75%. A year ago, the thirty-year was at 7.73 percent.

Freddie reported the average fifteen-year FRM at 6.24%, up twenty-six BPS from last week. The spread between the 30-year and 15-year narrowed to 0.51%, down from fifty-three BPS the prior week.

Fixed rates were highest in the North Central region, where that 30-year rose 34 BPS to 6.87%, and the 15-year jumped 39 BPS to 6.36 percent. States located in the North Central region include OH, IN, IL, MI, WI, MN, IA, ND and SD.

Freddie reported the average one-year adjustable rate mortgage (ARM) at 5.18%, up twelve BPS from last week. The more moderate increase in the ARM yield nudged ARM activity up to nine percent of overall applications from 8.30% last week, according to the Mortgage Bankers Association of America's (MBA) weekly application survey.

In its weekly commentary, HSH ASSOCIATES attributed last week's rising rates largely to a continuation of the prior week's selloff and short-week hedging by traders, rather than a result of any new data which moved the markets. HSH said, "we're of the opinion that it's yet too soon to tell whether or not we've reached a bottom."

HSH went on to say, "In fact, a few 'worse-than-expected' reports could easily send us back down the slide."

Freddie's chief economist, Robert Van Order, said some of November's better-than-expected reports helped push mortgage rates higher. "Reports that housing starts did not decline as much as expected, retail sales rose, and consumer sentiment rebounded over the last month or so suggest a shallower recession," he said.

Bankrate mortgage experts were mixed in their outlook for rates, with 42 percent saying rates would rise and an evenly split 58% saying rates would either fall or remain unchanged (+/- 2 BPS) during the next 30-45 days. Bankrate's financial analyst Greg McBride said, "rates are likely to pull back in the coming weeks, but not to the lows already seen."

Reflecting two weeks of rising rates, MBA reported that applications for refinances fell almost ten percent from last week. However, applications for home purchases were up 3.71%, helping overall applications to fall only 6.6 percent.

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