Interest rates were down significantly during the week ended
January 5, but the big news was the surge in mortgage applications
that welcomed in the New Year.
The Mortgage Bankers Association (MBA) announced that mortgage loan applications
increased 32.2 percent on a seasonally adjusted basis from the pace
during the week between Christmas and New Years. Not too surprising; but on
an unadjusted basis the rate was up 81.1 percent week-to-week and showed an
increase of 8.7 percent compared with the same week one year earlier.
Refinancing was also up, comprising 57.7 percent of total applications compared
to 50.9 percent the previous week. The market share of adjustable rate mortgages
(ARMs), however, continues to drop and now is at 9.3 percent of all applications
compared to 9.8 percent the previous week.
The MBA's Weekly Mortgage Applications Survey also contained some good
news for all of those people who are applying for mortgages. The average contract
interest rate for 30-year fixed-rate mortgages (FRM) decreased to 5.73 percent
from 6.05 percent the previous week, with points, including the origination
fee, increasing to 1.10 from 1.05.
The interest rate for 15-year FRM decreased a whopping 40 basis points to 5.21
percent with points increasing to 1.18 from 1.02. The one year ARM, however,
did bump up slightly, from 6.0 to 6.04 percent with points decreasing from 1.0
Likewise all four mortgage products tracked by Freddie Mac's Primary
Mortgage Market Survey fell to four week lows during the first week of the New
The 30-year fixed rate mortgage (FRM) averaged 6.07 percent with 0.5 point.
The previous week the average was 6.17 percent with 0.5 point. One year ago
the 30-year was at 6.18 percent.
The 15-year FRM dropped 9 basis points to 5.68 percent with 0.6 point. Fees
and points the previous week were 0.5 percent. During the same week in 2007
the 15-year averaged 5.94 percent
The Five-year Treasury-indexed hybrid ARM averaged 5.78 percent this week,
with an average 0.5 point, down from last week when it averaged 5.90 percent,
also with 0.5 point. A year ago, the 5-year ARM averaged 6.02 percent.
One-year Treasury-indexed ARMs had a more modest drop in the average rate,
going from 5.53 percent with 0.7 point to 5.47 percent with an average 0.5 point.
At this time last year, the 1-year ARM averaged 5.42 percent.
Frank Nothaft, Freddie Mac vice president and chief economist
commented, "The new year has begun with mixed signals on the direction of the
economy and mortgage market. On the downside, the Institute for Supply Management's
index of manufacturing activity showed significant contraction in this sector,
perhaps a harbinger of a more substantial economic slowdown to begin this year.
On the upside, the Conference Board reported that consumer confidence rose in
December for the first time in five months, with more positive expectations
for the next six months. Furthermore, interest rates have moved lower with average
30-year fixed-rate mortgage rates down about a tenth of a percentage point,
the lowest in four weeks.
"The latest home sales data also sent mixed messages on the direction
of housing activity towards the end of 2007. The mostly grave home sales reports
came with a few light notes. While new home sales fell in November to the slowest
pace since April 1995, existing home sales rose by a small margin to an annual
pace of 5 million units. Our latest forecast has total home sales continuing
to decline in the first quarter of the year before starting a slow recovery;
still, sales of new and existing houses are projected to be 5.09 million in
2008, a decline of more than 11 percent from the previous year."