Inflation Fears Cast Shadow on Mortgage Rates and Applications Decline
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Fears of inflation pushed mortgage rates higher according to the results of Freddie Mac's Primary Mortgage Market Survey for the week ended April 24.
The Survey reported that the 30-year fixed-rate mortgage (FRM) averaged 6.03 percent with 0.3 point compared to 5.88 percent with 0.4 point the week before.
The 15-year FRM averaged 5.62 percent and 0.3 point, up 22 basis points from one week earlier when fees and points averaged 0.5 point.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) carried an average interest rate of 5.68 percent with 0.5 point, up from the week ended April 17 when the rate was 5.48 percent with 0.6 point. The one-year Treasury-indexed ARM averaged 5.29 percent with 0.5 point. The previous week the rate was 5.10 percent with 0.6 point.
"Average rates on mortgages increased across the board this last week as the most recent economic data raised inflationary concerns in the capital markets," said Frank Nothaft, Freddie Mac vice president and chief economist. "For example, the Producer Price Index - a measure of wholesale inflation - increased 1.1 percent in March, nearly double the consensus expectations.
"March's index of leading indicators showed a tepid increase of 0.1 percent, after five consecutive months of decline. As a result, trading of federal funds futures contracts implied a reduced likelihood of a substantial rate cut at the next Federal Open Market Committee meeting."
The Weekly Mortgage Applications Survey conducted by the Mortgage Bankers Association (MBA) for the week ended April 25 reflected slightly declining interest rates.
According to the MBA survey the average contract interest rate for 30-year FRMs decreased to 6.01 percent from 6.04 percent with points, including the origination fee, increasing to 1.26 from 1.04.
The 15-year FRM decreased seven basis points to 5.53 percent with points increasing to 1.24 from 1.06.
One-year ARMs had an average contract interest rate of 6.86 percent with 1.4 points compared to 6.93 percent and 1.38 points a week earlier.
Mortgage application volume was down 11.1 percent from the previous week on a seasonally adjusted basis and 10.2 percent when unadjusted. The volume was down 14.2 percent from the same week in 2007.
Refinancing continues to lose popularity. Judging by the volume of applications, 45.7 percent of potential mortgages will be for the purpose of refinancing compared to 49.2 percent the previous week. Adjustable rate mortgages are even less popular with only 5.9 percent of applications in the survey seeking that type of loan. The previous week ARMs had a 6.6 percent market share.
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