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
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
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.
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
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.