Refinancing Applications Continue to Weaken

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Consumers hoping for continued low mortgage rates were disappointed when Freddie Mac’s Primary Mortgage Market Survey recently revealed the opposite. On a brighter note, just one year ago rates moved into the high 6.80 percent range during the three month spring and summer period, but turned around and achieved a long-term run in the 6.06-6.20 percent range, which tells us that there is at least some hope that rates will become lower over time.

However, consumers are far more concerned with the present mortgage rate situation, which involves the 30-year fixed-rate mortgage moving up by 16 basis points to 6.37 percent! This percentage is the highest the 30-year fixed-rate mortgage has escalated since October 26, 2006. Additionally, it’s also the quickest one-week percentage movement in almost 18 months. Fortunately, fees and points remain stable at 0.4. Overall, this rate is still remarkably below the average, which was at 6.62 percent just one year ago.

Some FRM History

The 15-year FRM rose from 5.92 percent to 6.06 percent with fees and points at an unchanged 0.4. This represents the highest rate for the 15-year FRM since February 1st of this year. Just about one year ago, the 15-year rate was at 6.23 percent. A ten basis point increase from the past week, the five-year Treasury-indexed hybrid adjustable-rate mortgage or ARM averages at 6.02 percent, also the highest level since February with fees and points at 0.5. Last year, the five-year ARM averaged at 6.21 percent.

Vice President and Chief Economist, Frank Nothaft said, “Stronger than expected consumer confidence and recent comments from members of the Federal Reserve raised some inflation concerns in the market, causing it to lower expectations of a Federal rate cut this year. This helped push mortgage rates higher this week.” He added, “We expect a gradual rise in mortgage rates over the remainder of the year with sales slipping further in the second half of the year.” Nothaft also predicts a gradual recovery during the end of the 2007 year.

The Mortgage Bankers Association also reported higher interest rates and decreased overall mortgage application activity. In fact, the Weekly Mortgage Applications Survey for the week ending May 24 revealed an increase in the average contract interest rate for 30-year FRMs from 6.23 percent to 6.32 percent. The 15-year FRM increased from 5.96 percent to 6.05 percent including points increasing to 1.27 percent in comparison 1.24. On the other hand, the one-year ARM changed only slightly, increasing two basis points to 5.74 with fees and points going down from 1.1 to 1.09.

Consumer mortgage application activity also went down 7.3 percent from the prior week, yet up 17 percent in comparison to the same week just one year ago. As opposed to the previous week, mortgage refinancing activity also falls short, decreasing to 39.7 percent from 4.23. Moreover, the ARM decreased most of all at a mere 17.7 percent of all applications versus 18.1 percent just one week before.

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