As the end of the year neared its end and with most people distracted by holiday
and family events, mortgage activity was listless and rates were mixed for the
week ended December 22 (Freddie Mac) and December 23 (Mortgage Bankers Association.)
Happily, for those still hoping to buy or refinance a house in early 2006,
rates, while trending upward, are doing so very slowly and during this most
recent week most rates were down a bit.
According to Freddie Mac's Weekly Primary Mortgage Market Survey,
the average rate for a 30-year fixed rate mortgage during the week was 6.26
percent with 0.6 in fees and points. This rate was four basis points lower than
that reported for the week ended December 15 although fees and points were up
The 15-year fixed rate mortgage also declined from 5.85 percent to 5.79 percent
with fees and points rising from 0.5 to 0.6.
Adjustable rate mortgages, however, continued to close the gap with fixed rate
products; only slightly more than a point now separates the 30-year from the
1-year ARM. The 5/1-year ARM was up five basis points to 5.82 percent with fees
and points taking a big jump from 0.5 to 0.7. The 1-year ARM increased seven
basis points to 5.22 percent. Fees and points were at 0.7 for this mortgage
type as well, up from 0.6 the previous week.
The Mortgage Bankers Association likewise reported that 30 year fixed-rate
mortgages were down, even if ever so slightly, for the week. The rate was 6.21
percent compared to 6.22 percent the previous week with points (including the
origination fee) creeping down a tiny 0.01 to 1.18. The 15-year fixed mortgage
was unchanged at 5.75 percent with points at 1.20 compared with 1.22 for the
The biggest change in MBA's survey, which includes only 80 percent loan-to-value
mortgages, was the one-year ARM which decreased five basis points to 5.36 percent
with points increasing from 0.95 to 0.98. Notably, the 1-year ARM, even with
the reported drop, is only 85 basis points below MBA's reported 30 year
fixed. Is it safe to assume that borrowers taking on the risk of a 1-year ARM
at this point are stretching to the limit to qualify for the loan?
As stated above, mortgage activity was down due to the holidays. On an unadjusted
basis applications were down 17.0 percent from the previous week. On an adjusted
basis (with an additional factor thrown in to compensate for the holiday) the
volume was down 6.8 percent from a week earlier. Applications were up 3.1 percent
compared with the same week one year earlier.
Refinancing as a share of overall mortgage activity decreased to 40.2 percent
from 41.7 percent the previous week and the adjustable-rate mortgage share also
decreased to 32.5 percent of total applications from 32.6 percent the previous