U.S. Mortgage Rates Hold Their Ground

By Amy Hoak, MarketWatch

RISMEDIA, May 4, 2007-(MarketWatch)-Fixed-rate mortgages remained flat and adjustable-rate mortgages moved just slightly over the week, according to Freddie Mac's weekly survey released on Thursday.

"The recently advanced report of first quarter Gross Domestic Product (GDP) was weaker than expected, growing only 1.3%. The housing market alone shaved a full percentage point off real GDP growth," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release. "Additionally, both consumer spending and price increases in consumer expenditures were quite tame in March."

All of the above were factors responsible for allowing mortgage rates to stay relatively flat, according to Nothaft.

The 30-year fixed-rate mortgage averaged 6.16% over the week ending May 3, unchanged from last week's average and down from its 6.59% average a year ago. The 15-year fixed-rate averaged 5.87% for the week, unchanged from last week and also down from its 6.22% average a year ago.

Meanwhile, 5-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.87% over the week, down slightly from last week's 5.88% average and also down from their 6.21% average a year ago. One-year Treasury-indexed ARMs averaged 5.42% for the week, down from their 5.43% average last week as well as their 5.67% average a year ago.

To obtain the rates, the 15- and 30-year fixed-rate mortgages required payment of an average 0.5 point, while the 5-year ARM required an average 0.6 point and the 1-year ARM required an average 0.7 point. A point is 1% of the loan amount, charged as prepaid interest.

While the refinance share of mortgage applications has trended downward since the end of 2006, a majority of those who are refinancing are extracting equity from their homes at the same time, Nothaft said.

"Given that rates on home equity loans are currently around 8.25%, homeowners have a big incentive to use cash-out refinancing as an alternative source of financing," he said.
In a separate survey released on Wednesday, the Mortgage Bankers Association reported that mortgage loan application volume was up a seasonally adjusted 0.6% for the week ending April 27. Volume was up about 9% compared with the same week in 2006.

The volume of refinance mortgages, however, decreased a seasonally adjusted 3.2% over the week, the group reported. The MBA survey covers about half of all U.S. retail residential mortgage originations.

Amy Hoak is a MarketWatch reporter based in Chicago.