It looks like the acceleration in mortgages rates which has been half-hearted over the last two years has now taken off in earnest. Some economists are predicting that the 30-year fixed rate mortgage will hit 6.7 percent by mid-2006, far higher than the year-end 2006 prediction of around 6.2 percent that Freddie Mac and others have been sticking to for months in spite of rising energy costs, the incredible growing deficit and other economic factors.
The 6.7 prediction is beginning to look real as Freddie Mac itself reported
that the average 30 year rates for the week ended October 27 rose five basis
points to 6.15 percent. This is the highest level for that product since June,
2005. Fees and points were unchanged at 0.5.
The 15-year increased from 5.65 to 5.69 percent but that increase was enough
to bring it to levels it had not reached since August of 2002. Fees and points,
however, did decline 0.1 to 0.5.
The average 1-year ARM increased to 4.91 percent from 4.89 percent for the week of October 20. Fees remained at 0.7.
The 5/1 ARM averaged 5.63 percent, an increase of four basis points since the previous week and the highest rate since Freddie Mac started tracking this product at the beginning of this year. Fees and points did drop from 0.7 to 0.6.
The Mortgage Bankers Association recorded an even bigger jump in its October 28 survey of 30-year fixed mortgages. The interest rate increased from 6.06 percent for 80 percent LTV loans to 6.21 percent and points, including the origination fee, also increased from 1.21 to 1.27. 15-year loans were up a whopping 18 basis points, averaging 5.75 percent. Points decreased from 1.30 to 1.27.
The one-year ARM increased only slightly - from 5.37 to 5.39 percent and points continued their long term bounce within a narrow margin around 1.0, finishing last week at 0.99
Mortgage application activity decreased 4.8 percent on a seasonally adjusted basis from the week before and 5.2 percent on an unadjusted basis. Activity, however, was down sharply from the same week in 2004 - 15.2 percent.
Refinancing activity as a percentage of overall mortgage applications increased
to 43.6 percent from 42.5 percent the previous week and the share of adjustable
rate mortgages declined one basis point to 29.4 percent of all mortgage applications.