Mortgage Rates Move Up On Inflation Worries
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New Home Sales Post Sharpest Jump In 14 Years
After quite a few weeks floating in the doldrums, mortgage rates
made some modest moves last week. Unfortunately those movements, from a consumer
perspective, were all in the wrong direction.
According to Freddie Mac's Primary Mortgage Market Survey® the 30-year
fixed-rate mortgage (FRM) averaged 6.21 percent with an average 0.4 point. This
is an increase from the previous week when it averaged 6.15 percent with 0.5 points.
The 15-year FRM had an average contract interest rate of 5.92
percent with 0.4 point compared to 5.87 percent with 0.5 point for the week
ended May 10.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.92
percent this week, with an average 0.5 point, up from last week when it averaged
5.89 percent with 0.6 point.
The one-year Treasury-indexed ARM was unchanged from the contract average of 5.48
percent with 0.7 point the previous week.
According to Frank Nothaft, vice present and chief economist
of Freddie Mac, "Mortgage rates inched up this week following the Federal
Open Market Committee statement reiterating that the predominant concern remains
the risk that inflation will fail to moderate as expected. However, as long
as core inflation continues to trend downward and economic growth remains sub-par
it is unlikely that we will see any big movement in mortgage rates.
Recent indicators point to continued weakness in the housing market, with the
bottom of the cycle still months away. There are signs that house sales
are stabilizing and excess inventories beginning to come under control, but
building permits continue to be weak and condo sales are soft in a number of
markets. On a bright note, existing home sales in the first quarter were up
2.4 percent over the fourth quarter of 2006, according to the National Association
of Realtors. And the average pace of mortgage applications for home purchase
over the first two weeks in May was the strongest since January 2006, according
to the Mortgage Bankers Association."
And the Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications
Survey for the week ending May 18. It also showed more movement than we have
come to expect in recent months, also in an upward direction.
The average contract interest rate of 30-year FRMs increased 10 basis points
to 6.23 percent with points increasing from 1.47 (including the origination
fee) to 1.53.
The 15-year FRM had an average contract interest rate of 5.96 with 1.24 points
compared to 5.81 percent with 1.35 points the previous week.
The greatest change was recorded by one-year ARMS which increased
from 5.61 to 5.72 percent with points dropping to 1.1 from 1.13.
All rate information is for 80 percent loan to value originations.
Mortgage activity was up slightly from the previous week - 1.6 percent
on a seasonally adjusted basis and 1.4 percent unadjusted. Application
volume was 23 percent higher than the same week one year ago.
Refinancing as a share of all mortgage activity increased fractionally from
the previous week; 42.3 percent compared to 42.1 percent. The ARM share also
recovered a bit and accounted for 18.1 percent of all applications. The ARM
share the previous week was 17.4 percent.
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