Uptick in Mortgage Rates Not a Result of Subprime Problems
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Mortgage rates increased in every category last week according
to surveys released by Freddie Mac and by the Mortgage Bankers Association.
Freddie Mac's Primary Mortgage Market survey reported that the 30-year
fixed-rate mortgage (FRM) averaged 6.62 percent with 0.4 point during the week
ended August 16. The previous week the average rate was 6.59 also with average
fees and points of 0.4. In spite of a turbulent year, rates are little changed;
one year ago the 30 year FRM averaged 6.52 percent.
The 15-year FRM had an average contract interest rate of 6.30 percent with
0.5 point compared with 6.25 percent with 0.4 point for the week ended August
9. One year ago the rate averaged 6.20 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages
(ARMs) averaged 6.35 percent this week, with an average 0.5 point. Last week
that product averaged 6.33 percent also with 1/2 point. During the same week
in 2006 the 5-year ARM averaged 6.18 percent.
The traditional one-year Treasury-indexed ARM had a rate of 5.67 percent this
week with 0.6 point, up from last week when it averaged 5.65 percent with 0.5
point. The rate is virtually unchanged from one year ago when the 1-year ARM
averaged 5.65 percent.
Freddie Mac's vice president and chief economist Frank Nothaft
remarked that "Interest rates on prime conforming fixed-rate mortgages ticked
up a little in the past week, in line with 10-year Treasury rates movements
and retracing part of last week's decline. Problems in the non-prime mortgage
market where funds are expensive and hard-to-get have not affected the prime
conforming market.
"This week's data releases included the Producer Price Index and Consumer
Price Index for July. Core inflation at the wholesale level increased 0.1 percent
in July, or 2.3 percent year-over-year, below market expectations, while core
inflation at the retail level grew by 0.2 percent, or 2.2 percent year-over-year,
in line with what had been expected."
The Mortgage Bankers Association's Weekly Mortgage Applications Survey
for the week ended August 17 reported similar changes in rates.
The 30-year FRM had an average interest rate of 6.49 percent with 1.48 points,
including the origination fee, compared to the week before when rates averaged
6.45 percent with 1.54 points.
The 15-year FRM rate averaged 6.20 percent with 1.10 points. The previous week
it was 6.19 with 1.16 points.
One-year ARMs increased to 5.84 from 5.81 percent with points decreasing from
1.11 to 1.05.
Mortgage applications volume was down 5.5 percent on a seasonally
adjusted basis from the previous week and 6.5 percent when unadjusted. Volume
was 14.2 percent higher than during the same week one year earlier.
Jay Brinkmann, MBA's vice president of research and economics cautioned that,"Given
the current turmoil in the mortgage market, week-to-week changes
in the purchase applications index should be treated with a certain degree of
caution. For example, the sudden exit of a major originator several weeks ago
may have led to a bump up in applications over the last two weeks as those borrowers
caught in the shutdown reapplied for mortgages at other institutions. The drop
in applications we see here may be an indication that those borrowers have now
been taken care of."
Refinancing applications as a percentage of total application volume was unchanged
at 39.9 percent while the share of mortgage activity captured by adjustable
rate mortgages decreased from 21 percent of total applications two weeks ago
to 18.6 percent.
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