Purchase loan demand up 26 percent from year ago

By Inman News, Thursday, January 24, 2013

Fixed mortgage rates edged up this week but remain near all-time lows as the Federal Reserve continues to buy $40 billion in mortgage-backed securities issued by Fannie Mae and Freddie Mac each month to make borrowing more affordable.

Rates on 30-year fixed-rate mortgages averaged 3.42 percent with an average 0.7 point for the week ending Jan. 24, up from 3.38 percent last week but down from 3.98 percent a year ago, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. Rates on 30-year fixed-rate loans hit a low in Freddie Mac records dating to 1971 of 3.31 percent during the week ending Nov. 21, 2012.

For 15-year fixed-rate mortgages, rates averaged 2.71 percent with an average 0.7 point, up from 2.66 percent last week but down from 3.24 percent a year ago. Rates on 15-year fixed-rate loans hit a low in Freddie Mac records dating to 1991 of 2.63 percent during the week ending Nov. 21, 2012.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.67 percent with an average 0.5 point, unchanged from last week but down from 2.85 percent a year ago. Rates on five-year ARM loans have never been lower in Freddie Mac records dating to 2005.

For one-year Treasury-indexed ARM loans, rates averaged 2.57 percent with an average 0.5 point, unchanged from last week but down from 2.74 percent a year ago. Rates on one-year ARM loans hit a low in records dating to 2005 of 2.52 percent during the week ending Dec. 20, 2012.

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans during the week ending Jan. 18 was up a seasonally adjusted 3 percent from the week before, and 26 percent from the same time a year ago. Requests to refinance were up 8 percent from the week before, accounting for 82 percent of total mortgage applications.

The increase in purchase applications driven primarily by demand for conventional loans eligible for purchase and guarantee by Fannie and Freddie. Applications for conventional purchase loans were at the highest level since October 2009 after seasonal adjustments.

While some inflation “hawks” worry that the Fed’s efforts to stimulate economic growth will boost inflation to levels that are higher than desirable, the Fed has said it will continue some level of “quantitative easing” as the outlook for the labor market does not “improve substantially.” In addition to its open-ended purchases of mortgage-backed securities guaranteed by Fannie and Freddie, the Fed is buying up $45 billion in long-term Treasurys each month.

Last week, Federal Reserve Chairman Ben Bernanke said December unemployment numbers were “not an acceptable situation,” and Bernanke is seen as having support for continued quantitative easing from the Federal Open Market Committee, which is scheduled to hold its next meeting next week, Bloomberg reports.

Although the committee is expected to discuss when it will scale back or discontinue its bond purchases, “There’s a reasonably high bar to stopping the stimulus altogether,” Barclays economist Dean Maki told Bloomberg. Unemployment has been hovering at around 7.8 percent, and Maki expects the Fed to ease only as the jobless rate falls closer to 7 percent.