Mortgage Rates Kept In Check By Market Jitters

Mortgage rates tracked by Freddie Mac in its Primary Mortgage Market Survey for the previous week mostly established new 2007 lows.

The 30-year fixed-rate mortgage (FRM) lost four basis points from the previous week, averaging 6.14. This was the lowest rate since the week ended December 21. Fees and points were up from 0.4 to 0.5 point. The same week in March, 2006 the average rate was 6.37 percent.

The 15-year FRM averaged 5.86 percent, also a new low for the year. The previous week it averaged 5.92 percent. Points were unchanged at 0.5. One year ago the 15-year averaged 6.0 percent.

Five-year Treasury-indexed hybrid adjustable rate mortgages (ARMS) also recorded a new low for the year, averaging 5.90 percent, 3 basis points lower than the week before. Fees and points were 0.5 compared to 0.6 the previous week. This is 13 basis points lower than the 5/1 hybrid rate one year ago and the lowest the product has been since February of last year.

Another new low for the year was scored by the Treasury-indexed one-year ARM which averaged 5.47 percent compared to 5.49 percent a week ago. Fees and points were unchanged at 0.6.

According to Frank Nothaft, Freddie Mac vice president and chief economist, mortgages rates were down this week as volatility in stock markets elsewhere in the world led to concerns about the U.S. economy. "Uncertainties about the strength of the economy dominated the effects of other indicators, such as January's personal income growth and core inflation rate measured through the personal consumption report. Both increased at rates faster than had been expected, and potentially would have put upward pressure on interest rates. But the flight to quality due to the stock market's fall pushed bond yields down instead."

"Looking ahead, as excess business inventories are worked off and the drag from residential investment diminishes, we expect real GDP growth to accelerate in the first half of 2007 to 2.6 percent and average 3 percent for the year. That considered we do not foresee significant movements in mortgage rates, with rates on 30-year fixed-rate mortgages averaging between 6.3 and 6.4 percent for the remainder of the year."

Rates reported by the Mortgage Bankers Association (MBA) for the week ended March 9 were more mixed than Freddie Mac's. The average contract interest rate for a 30-year FRM decreased from 6.04 to 6.03 percent with points, including the origination fee, increasing to 1.38 from 1.27. Both the 15-year FRM and the one-year ARM increased for the week. The 15-year was up 5 basis points to 5.78 percent with points up to 1.22 from 1.24 while the one-year ARM was up from 5.79 percent to 5.86 percent with points decreasing to 0.76 from 0.8.

All rate quotes are for 80 percent loan to value originations.

Mortgage activity was up only slightly, increasing 2.8 percent on a seasonally adjusted basis and 3.2 percent unadjusted. However, there was a strong improvement in the level of mortgage originations since the same week in 2006 with volume increasing 19.1 percent.

Refinancing as a share of overall activity increased from 46.1 to 46.2 percent and ARMs held their own, increasing to 21.9 from 21.4 percent of all mortgage applications.