After surging a bit during the week ended October 12, mortgage rates barely moved according to the Primary Mortgage Market Survey conducted by Freddie Mac for the week ended October 19.

The average rate for the 30-year fixed-rate mortgage was 6.36 percent last week compared to 6.37 the week before. Points and fees were unchanged at 0.5.

The other mortgage products showed a similar lack of movement. The 15-year fixed-rate mortgage was unchanged at 6.06 percent with 0.5 points. The Treasury-indexed 5-year adjustable rate mortgage (ARM) averaged 6.11, up one basis point from the previous week although fees and points declined from 0.6 to 0.5. The One-year Treasury-indexed ARM was also up one basis point to 5.57 and fees and points increased from 0.7 to 0.8.



One year ago the 30-year FRM averaged 6.10 percent, the 15-year FRM was at 5.65 percent and the five-year and one-year ARMs were at 5.59 percent and 4.89 percent respectively.

Frank Nothaft, Freddie Mac's vice president and chief economist attributed the stagnant rates to a vigil by a market awaiting this week's Federal Reserve meeting. "General consensus," he said, "leans heavily toward the notion that the Fed will not raise rates at that meeting, taking upward pressure off mortgage rates this week."

"A rate change in either direction would impact short-term rates more directly, but what the Fed says in its statement can have an impact on long-term rates." (At 3 p.m. Wednesday the Fed announced it was holding the Federal Funds Rate constant at 5.25 percent.)

As of mid-afternoon Wednesday the Mortgage Bankers Association had not released its weekly mortgage survey results, possibly because the organization is winding up its annual conference in Chicago. They have, however, released the results of their Mortgage Originations Survey for the first half of 2006.

The survey's results show a decrease of 16 percent since the last half of 2005 in overall mortgage originations, the result of a 10 percent decline in mortgages used to purchase homes and a 22 percent decrease in refinancing applications. The survey, however, showed a continued demand for exotic mortgages such as interest-only (IO) and optional payment products.

Interest only loans accounted to 26 percent of all originations during the first half of the year with fixed rate interest only loans making up 24 percent of all interest only loans compared to 13 percent the last half of last year. Payment option mortgages represented 15 percent of the dollar volume of loan activity during the survey period compared to 8 percent in the previous two quarters.

"In the context of a decelerating housing market and a slowing of overall mortgage originations activity, consumers continued to choose IOs and payment option loans in the first half of 2006," said Doug Duncan, MBA's chief economist and senior vice president of research and business development. "In particular, fixed-rate IO volume increased markedly. As expected, consumers respond to changing opportunities in the marketplace, but it looks like these products serve an important need."

Almost one in three home purchases in the first half of 2006 were made by first-time homebuyers. The average loan amount taken by these buyers was $189,883, significantly less than the average loan amount of $236,517 for non first-time homebuyers.

Subprime mortgage originations decreased 30 percent in terms of both aggregated value and sheer numbers and composed 19 percent of all originations during the study period. 55 percent of subprime mortgages were written for refinancing compared to 60 percent during the previous period and 75 percent of those refinance originations were written with a cash-out component compared with 88 percent in the last half of 2005. Subprime loans for home purchases declined 25 percent from 2005 to 2006 while prime loans for purchase purposes were down only 6 percent. One in four subprime purchase loans were taken out by first time home buyers.

Subprime loan amounts which averaged 186,790 in the second half of 2005 were up to $200,167 in the first two quarters of this year and 67 percent of originations were adjustable rate products including interest only loans compared to an ARM share of 74 percent in the second half of 2005.

We will report briefly on the rates and mortgage loan activity reported by MBA for the week ended October 20 when the figures are released.