Mortgage rates probe new lows

Eight out of 10 loan applications are for refis ….. By Inman News

Mortgage rates plunged to new all-time lows this week as investors in bonds that fund most home loans reacted to news that the economy grew more slowly than expected during the last three months of 2011.

Freddie Mac’s weekly Primary Mortgage Market Survey showed rates on 30-year fixed-rate mortgages averaged 3.87 percent with an average 0.8 point for the week ending Feb. 2, down from 3.98 percent last week and 4.81 percent a year ago. That’s a new all-time low in Freddie Mac survey records dating to 1971.

Rates on 15-year fixed-rate loans averaged 3.14 percent with an average 0.8 point, down from 3.24 percent last week and 4.08 percent a year ago. Rates on 15-year loans have never been lower since Freddie Mac began tracking them in 1991.

For five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.8 percent with an average 0.7 point, down from 2.85 percent last week and 3.69 percent a year ago. That’s a new low in records dating to 2005.

Rates on one-year Treasury-indexed ARM averaged 2.76 percent with an average 0.6 point, up slightly from last week’s record low of 2.74 percent. At this time last year, the one-year ARM averaged 3.26 percent.

"Most mortgage rates eased to all-time record lows this week as fourth-quarter growth in the economy fell short of market projections," said Freddie Mac chief economist Frank Nothaft in a statement. "The gross domestic product rose 2.8 percent in the final three months of 2011, below the market consensus forecast of 3 percent, while consumer spending in December was flat. One bright spot, however, was that fixed residential investment increased for the third consecutive quarter and residential construction spending rebounded in December, rising 0.7 percent."

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans was down a seasonally adjusted 1.7 percent during the week ending Jan. 27 compared to the week before. Demand for purchase loans was down 4.3 percent from the same time a year ago.

Requests to refinance accounted for 80 percent of all mortgage applications, down from 81.3 percent the week before.

"The Federal Reserve surprised the market last week by indicating that short-term rates were likely to stay at their current low levels until the end of 2014," said MBA chief economist Michael Fratantoni in a statement. "Longer-term Treasury rates dropped in response, and mortgage rates for the week were down slightly as a result."


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Economic Update – February 21, 2011

Retail sales rose 0.3% to $381.57 billion in January after a 0.5% increase in December. It was the seventh straight monthly gain but the smallest since June. On a year-over-year basis, retail sales rose 7.8%.

Total business inventories rose 0.8% in December to $1.44 trillion, the highest level since January 2009. Total business sales rose 1.1% to $1.15 trillion in December, the highest level since September 2008.

The National Association of Home Builders/Wells Fargo housing market index was unchanged in February for the fourth consecutive month at 16. An index reading below 50 indicates negative sentiment about the housing market.

The combined construction of new single-family homes and apartments in January rose 14.6% to a seasonally adjusted annual rate of 596,000 units. Single-family starts fell 1%. Multifamily starts rose 77.7%. Applications for new building permits, seen as an indicator of future activity, fell 10.4% to an annual rate of 562,000 units.

The producer price index, which tracks wholesale price inflation, rose 0.8% in January after a revised 0.9% increase in December. Core prices — excluding food and fuel — rose 0.5% in January.

Industrial production at the nation’s factories, mines and utilities fell 0.1% in January, following a revised 1.2% increase in December. Compared to a year ago, industrial production is up 5.2%. Capacity utilization was 76.1% in January.

Initial claims for unemployment benefits rose by 25,000 to 410,000 for the week ending February 12. Continuing claims for the week ending February 5 rose by 1,000 to 3.9 million.

Upcoming on the economic calendar are reports on the housing price index on February 22, existing home sales on February 23 and new home sales on February 24.

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