Mortgage Rates, Applications, Cash Out Refinancing All Up
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Fixed mortgage rates increased for the fifth straight week
according to Freddie Mac's Weekly Primary Mortgage Market Survey for the week
ended April 27 and adjustable rate mortgages (ARMs) logged the sixth consecutive
week of increases.
The 30-year fixed rate mortgage increased from 6.53 percent during the week
ended April 20 to 6.58 percent although fees and points dropped from 0.6 to
0.5. The 15-year fixed rate was up four basis points to 6.21 percent with fees
and points steady at 0.5.
In the ARM corner the 5/1 ARM rate pulled even with the 15-year fixed rate
at 6.21 percent, up from 6.16 the previous week while fees and points were down
from 0.8 to 0.6 and the 1-year ARM increased five basis points to 5.68 percent.
Fees and points dropped off from a previous recent record 0.9 to 0.7.
In a separate report Freddie Mac announced that cash-out financing
of its owned loans recently hit the highest level since the third quarter of
1990.
First quarter 2006 figures show that 88 percent of Freddie Mac-owned loans
that were refinanced during the quarter resulted in new mortgages that were
at least five percent higher than the loans they replaced. During the fourth
quarter of 2005 the share of refinanced loans that were termed "cash-out"
was 81 percent. Those borrowers refinancing a mortgage at a lower amount -
putting more money down at closing - was down to 4%, the lowest rate since
at least the fourth quarter of 1998 - the earliest date for which information
was reported.
Overall, refinancing accounted for 44 percent of all mortgage applications
during the first quarter as compared to 45 percent during the last quarter of
2005. According to Frank Nothaft, Freddie Mac vice president and chief economist,
"almost no one is refinancing to reduce their interest rate..." Nothaft continued
to explain that the first quarter of 2006 was the first time in 20 quarters
when the interest rates for new mortgages was higher than the old rate for more
than half of those who were refinancing. It is possible, the report said, that
increasing interest rates on many home equity loans, which tend to be tied to
the prime rate, have been rising fast enough to make refinancing the first mortgage
lien to pay off the equity lien feasible. The prime rate is currently at 7.75
percent with a distinct probability of rising higher. Home equity lines often
put a margin of one or two points on top of that making a rate of 6.5 percent,
particularly a fixed rate of 6.5 percent appear to be a bargain. The median
age of the loans being refinanced was 3.0 years.
Freddie Mac estimated that $170 billion in home equity will be converted
to cash through refinancing during 2006.
During the first quarter the median ratio of old-to-new interest rates was
0.98 which means that one half of borrowers who were refinancing mortgages ended
up with a new loan with a rate that was two percent higher than the old rate.
The Freddie Mac report also stated that those properties that were refinanced
during the first quarter experienced a median increase in home values of 30
percent since the last time a loan was closed on the property.
The Mortgage Bankers Association's Weekly Mortgage Applications Survey
for the week ended April 28 also reported across-the-board rate increases. The
average contract interest rate for 30 year fixed-rate mortgages increased four
basis points to 6.57 percent with points, including the origination fee, increasing
from 1.10 to 1.18. The 15-year fixed-rate mortgage was up slightly from 6.18
to 6.19 percent with points up 0.07 to 1.18. The one-year ARM also increased
from 5.96 percent to 6.08 percent and points also increased from 0.82 to 0.85.
All MBA figures are for 80 percent loan to value originations.
Mortgage application volume was up 8.8 percent on a seasonally
adjusted basis and 9.6 on an unadjusted basis from the previous week but, as
has been the case for some time, was down from the same week last year; this
time the differential was 15.6 percent.
Refinancing as a share of all mortgage activity was down to 35.2 percent of
all loan applications from 36.7 the previous week. This is the lowest share
of the market claimed by refinancing since late June 2004. The ARM share of
mortgage activity increased fractionally from 28.2 percent to 28.3 percent for
the week.
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