McLEAN, Va. – Long-term mortgages rates, buffeted by the ongoing financial crisis, fell again this week – one of the key aims of the federal intervention in the markets.
The average for the benchmark 30-year, fixed-rate loan declined to 5.78% this week, from 5.93% last week, and 6.35% the week before, according to Freddie Mac.
The average for the 15-year, fixed-rate mortgage dropped to 5.35% this week, from 5.54% last week, and 5.90% the week before.
ARM rates also move sharply lower this week, with the average for the five-year ARM dropping to 5.67%, from 5.87%; and the average for the one-year ARM falling to 5.03%, from 5.21%.
The lower rates apparently have caused a flurry of new mortgage applications, according to the Mortgage Bankers Association, which reported Wednesday applications surged by 33% over the past week, the vast majority of it refinancings.
“What we’re seeing now is more people are coming in for refinancing,” said John Katalinich, chef lending officer for Inova FCU, in Elkhart, Ind. “As rates continue to go down you’re going to see more people want to refi.”
Katalinich said the $300 million credit union has reduced its own rates by an average of 50 basis points over the past two weeks. “That’s a big chunk,” he told The Credit Union Journal yesterday.
The refinance share of mortgage activity increased to 51.6% of total applications last week, from 36.3% the previous week, according to the MBA. The ARM share of activity decreased to 4% from 6.4% of total applications from the previous week.
Still, mortgage rates again will be faced with upward pressures starting Nov. 1, when Fannie Mae and Freddie Mac are scheduled to increase their surcharges on buying mortgages by another 25 basis points, and add new charges on cash-out refinances for credit scores under 760 with low loan-to-value ratios. This will make the cost of making mortgage loans more expensive for credit unions and banks, a cost which will have to be passed on to borrowers.
