The Federal Reserve's striking 50 basis point cut in the Federal Funds Rate occurred only two days before the Freddie Mac Primary Mortgage Market Survey and the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey were locked down for the weeks ending September 20 and September 21 respectively so the surveys showed no reaction to the cuts. While the Federal Funds Rate has no direct relationship to mortgage rates, changes to the former do ultimately wend their way through the system to have some impact on the latter but it takes a while.

Frank Nothaft, Freddie Mac vice president and chief economist commented that, "Mortgage rates were largely unchanged in the previous week, with long-term rates lingering at lower levels not seen since May. The recent retreat in mortgage rates has brought in an increased volume of mortgage applications, according to the Mortgage Bankers Association, and pushed the share of applications for refinancing to the highest rate since April.



"On Tuesday, the Fed announced a half-percentage-point cut to the Fed funds rate. In addition to bringing down short-term interest rates, the cut should also dissipate some of the volatility in short-term interest rates we observed earlier."

Freddie Mac's data showed that the 30-year fixed-rate mortgage (FRM) had an average contract interest rate of 6.34 percent with 0.5 point for the week. This was an increase from the previous week when it averaged 6.31 percent with 0.5 point. One year ago the 30-year FRM averaged 6.40 percent.

The 15-year FRM averaged 5.98 percent, 1 basis point higher than the previous week. Fees and points were also up from 0.4 to 0.5 point. One year ago the 15-year averaged 6.06 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.21 percent this week, with an average 0.5 point, up from last week when it averaged 6.17 percent with 0.6 point. A year ago, the 5-year ARM averaged 6.08 percent.

One product did show an average rate decrease, however slight. One-year Treasury-indexed ARMs averaged 5.65 percent this week with an average 0.6 point compared to the previous week when it averaged 5.66 percent. At this time last year, the 1-year ARM averaged 5.54 percent.

The MBA survey gathered data indicating more significant interest rate changes. The average contract interest rate for 30-year FRM increased to 6.38 percent from 6.29 percent, with points, including the origination fee, increasing to 1.15 from 1.02.

15-year FRM increased to 7 basis points to 6.06 percent with points increasing to 1.12 from 1.09.

As with the Freddie Mac survey data, only the one-year ARM showed a decreased rate but this was significant. The average contract interest rate for one-year ARMs decreased to 6.09 from 6.39 percent, with points decreasing to 0.93 from 0.95.

Mortgage activity was down 2.8 percent from the previous week on a seasonally adjusted basis and 3.3 percent adjusted.. While the survey week for Freddie Mac and MBA end only one day apart (Thursday v. Friday) there is a delay of five days before MBA reports results. In the quote above about MBA's data on mortgage originations, Frank Nothaft is reporting on MBA data for the week ended September 14 (when activity increased) while we are reporting on the week ending September 21 (when it did not.) Drives us crazy too.