Borrowers rush to beat FHA premium increases

By Inman News, Thursday, April 21, 2011

Mortgage rates eased this week for the first time in a month, as signs of inflation remained subdued, Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.

Rates on 30-year fixed-rate mortgages averaged 4.8 percent with an average 0.7 point for the week ending April 21, down from 4.91 percent last week and 5.07 percent a year ago.

This year, rates on 30-year fixed-rate loans have ranged from 4.71 percent in early January to a high of 5.05 percent in February. The 30-year fixed-rate mortgage hit an all-time low in Freddie Mac records dating to 1971 of 4.17 percent during the week ending Nov. 11.

“Low inflation is keeping mortgage rates at bay,” said Freddie Mac Chief Economist Frank Nothaft in a statement. “The core consumer price index rose just 0.1 percent in March, below the market consensus forecast. The 12-month growth rate in core prices was 1.2 percent, which is also rather low by historical standards.”

Freddie Mac’s survey showed rates on 15-year fixed-rate mortgages averaging 4.02 percent with an average 0.7 point, down from 4.13 percent last week and 4.39 percent a year ago. The 15-year fixed-rate mortgage hit a low in records dating back to 1991 of 3.57 percent in November.

Rates on 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 3.61 percent with an average 0.6 point, down from 3.78 percent last week and 4.03 percent a year ago. The 5-year ARM hit a low in records dating to 2005 of 3.25 percent in November.

Rates on 1-year Treasury-indexed ARMs averaged 3.16 percent with an average 0.6 point, down from 3.25 percent last week and 4.22 percent a year ago.

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans was up a seasonally adjusted 10 percent during the week ending April 15 compared to the week before.

The increase in purchase loan applications to the highest level since Dec. 3 was largely due to a 17.6 percent increase in applications for government-backed loans, the MBA said. Borrowers were likely motivated by a scheduled increase in FHA insurance premiums, the group said.

Despite the surge in demand, purchase loan applications remained 11.4 percent below the level seen at the same time a year ago, the MBA said.

Requests for refinancings were up 2.7 percent from the week before, but accounted for 58.5 percent of mortgage applications, the lowest share since May, 2010.

MBA economists expect rates on 30-year fixed-rate loans will average 5.1 percent during April, May and June, and climb to an average of 5.6 percent during the final three months of the year.

In an April 14 forecast, MBA economists predicted that rates on 30-year fixed-rate loans will rise more gradually next year, to an average of 6 percent in the final three months of 2012.