Fixed Mortgage Rates Nudge 6 Percent For First Time Since Spring

Mortgage rates rose yet again during the week ending October 6 (Freddie Mac) and October 8 (Mortgage Banker's Association). The flagship 30 year fixed rate mortgage was, at the end of the week, seriously flirting with 6 percent for the first time in six months.

According to the Freddie Mac survey the 30 year was up seven basis points to 5.98 percent and the 15-year fixed increased from 5.48 percent to 5.54 percent. Fees and points for both fixed products remained unchanged at 0.5. The 5/1 ARM increased four basis points to 5.48 percent while fees and points increased 0.1 to 0.6; the one-year ARM went from 4.68 percent to 4.77 percent with fees and points unchanged at 0.6.

Rates began their current climb during the week ended September 15 and since then each product has increased at least 22 basis points with the 1 year ARM up 31 basis points.

The MBA survey which showed dramatic increases during the week ended September 30 took a bit of a breather and allowed Freddie Mac to catch up, at least in the fixed rate categories. The average contract interest rate for 30 year fixed-rate mortgages was up four basis points to match Freddie at 5.98 percent with points, including the origination fee up 1.01 to 1.22 for 80 percent LTV loans. The 15-year fixed was unchanged at 5.55 percent with points increasing from 1.15 to 1.19 over the previous week.

The one-year ARM, however, was up 13 basis points from the previous week and is running, in MBA's survey, substantially ahead of the rate reported by Freddie Mac. The average rate of 5.26 percent brought the differential between the ARM and the 30-year fixed rate mortgage down to 0.72 basis points, the lowest spread since March 9, 2001.

Mortgage application activity continued to decline, decreasing 2.6 percent on both a seasonally adjusted and unadjusted basis from the week before. Compared to the same week in 2004, however, activity was up 5.4 percent, ending a two week year-over-year downturn.

Refinancing was down a bit, representing 43.5 percent of all mortgage applications compared to 44.5 a week earlier and the ARM share of activity decreased to 29.5 percent from 29.8 the previous week. That points decreased on average from .98 to .96 may have helped to shore up ARM activity in spite of the flattened yield curve.