Mortgage rates fall to three-month low - Sacramento Business Journal:

The Federal Reserve's move to raise short-term interest rates the 16th consecutive time had no effect on long-term rates.

Freddie Mac's weekly mortgage rate report says the average 30-year fixed-rate mortgage fell this week, from 6.59 to 6.58 percent. Adjustable-rate mortgages also fell.

"Less-than-expected job growth in April helped mortgage rates to level off this week." says Freddie Mac (NYSE: FRE) chief economist Frank Nothaft. "However, next week's release of the April consumer and producer price indexes may lift mortgage rates higher if the figures show an acceleration in inflation."

Even with the modest decline this week, 30-year mortgages are still almost 1 percent higher than they were a year ago. A separate report from the Mortgage Bankers Association shows mortgage applications fell nearly 6 percent last week as higher rates slow home buying and refinancing.

In Sacramento, the median price for a house sold in March was $376,010, according to the California Association of Realtors, down less than 1 percent from the previous month, but still 5.2 percent higher than a year ago.

home loan demand falls with increasing mortgage rates

By Julie Haviv

NEW YORK, May 10 (Reuters) - U.S. mortgage applications fell last week, led by a steep decline in home refinancing loans as interest rates hit their highest this year, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended May 5 decreased 5.8 percent to 562.1 from the previous week's 596.8.

The MBA's seasonally adjusted purchase mortgage index fell 3.9 percent to 416.5.

The purchase index -- considered a timely gauge of U.S. home sales -- was also substantially below its year-ago level of 526.2.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.61 percent, up 0.04 percentage point from the previous week, its highest level since June 2002 when it reached 6.65 percent.

The group's seasonally adjusted index of refinancing applications decreased 8.8 percent to 1,427.4, its lowest level this year. A year earlier the index stood at 2,263.3.

The refinance share of mortgage activity decreased to 33.8 percent of total applications from 35.2 percent the previous week, which was its lowest share of activity since June 2004.

Historically low mortgage rates have fueled a five-year housing boom, helping support the U.S. economy's recovery from recession despite uncertain business investment.

Analysts differ on whether or not there is a housing bubble, but most agree that the market is cooling off from its record run.

Fixed 15-year mortgage rates averaged 6.20 percent, up from 6.19 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 6.04 percent from 6.08 percent.

The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.

Countrywide, Quicken Say Rising Rates Spur Mortgage Refinancing

May 8 (Bloomberg) --

Countrywide Financial Corp., the biggest U.S. mortgage company, and Quicken Loans Inc., the top Internet home lender, expect refinancing to increase as rising borrowing costs prompt homeowners to switch to fixed-rate loans.

About $200 billion of adjustable-rate mortgages will be reset this year, according to Calabasas, California-based Countrywide. Fifty-five percent of the home loans the lender made in the first quarter were used to replace floating-rate mortgages with ones that pay a fixed rate, compared with 47 percent a year ago. Next year, $1 trillion of floating-rate loans are due to reset.

The difference between the monthly payment on an adjustable- rate home loan and a 30-year mortgage narrowed as the Federal Reserve raised interest rates 15 times since June 2004. The monthly payment on a floating-rate mortgage was about 30 percent less than for a loan charging a fixed rate two years ago. Today, the gap is about 10 percent.

``The consumer preference these days is for the longer-dated mortgage'' loans that reduce interest-rate risk, said Larry Goldstone, chief operating officer of Santa Fe, New Mexico-based Thornburg Mortgage Inc., which made $5 billion of adjustable-rate loans last year.

Rising Rates

A $200,000 one-year adjustable-rate mortgage made in 2004 costs about $1,157 a month now, $230 more than the original charge. A 30-year loan originated at the same time cost $1,214 a month. Payments on a new 30-year mortgage are about $1,276 a month.

The monthly payment on floating-rate mortgages may increase again as all 63 economists surveyed by Bloomberg expect the Fed to raise its benchmark by a quarter point to 5 percent on May 10.

The average rate on a one-year ARM increased to 5.67 percent on May 5 from 3.76 percent before the Fed started lifting borrowing costs in June 2004. The average rate for a 30-year, fixed-rate loan rose to 6.59 percent from 6.12 percent during the same period, according to Freddie Mac, the second-largest source of mortgage financing.

Customers with adjustable-rate mortgages are ``now moving out of the short-term rates into the safety of the longer term rates while they are still in that middle-6-percent range,'' Bob Walters, chief economist at Quicken, said in an interview last month from Farmington Hills, Michigan. Livonia, Michigan-based Quicken made $16 billion of mortgages in 2005.

Mortgages will increase 9 percent this year, down from more than 10 percent annually from 2002 to 2005, Fannie Mae said in a report in April. At that rate, residential mortgage debt will exceed $10 trillion next year. Fannie Mae, the largest source of mortgage money in the U.S., is based in Washington.

Annual Meeting

Bankers from across the nation meet in Chicago this week at the annual conference of the Mortgage Bankers Association, amid signs the market is cooling. Sales fell as yields on 10-year Treasuries, a benchmark for pricing 30-year mortgages, rose 71 basis points this year to 5.10 percent.

Existing home sales slowed to a 6.92 million annual rate as of March from a record 7.27 million rate in June last year, the National Association of Realtors said.

Lenders profited from the U.S. housing boom, collecting fees from homeowners who refinanced debt as the Fed reduced rates to a 45-year low of 1 percent in 2003. Mortgage rates dropped to records and house prices soared.

Residential mortgage debt surged to a record $9.15 trillion last year from $5.57 trillion in 2001, according to the Fed's quarterly Flow of Funds report. During that period, ARMs grew to more than a third of all mortgages originated, from an average of 10 percent, Mortgage Bankers Association data show.

Real Estate Rally

The average home price peaked last year at $275,000, up more than 55 percent over four years, according to the National Association of Realtors. A buyer at that price last June would have saved $180 a month with a one-year adjustable-rate loan instead of a 30-year fixed-rate mortgage.

The switch from floating-rate to fixed-rate loans is helping mortgage lenders profit even as the housing market slows. Countrywide's first-quarter profit surpassed analysts' estimates as revenue from loan sales fell less than expected.

Countrywide's stock rose to a record $41.38 on May 5 in New York Stock Exchange composite trading from a 52-week low of $30 on Oct. 13. The firm's profit increased fivefold between 2001 and 2005, to $2.53 billion, and its shares gained an average of 23.5 percent a year.

Loan originations rose 13 percent in the first quarter from a year earlier to $103 billion, the company said April 11. Company spokesmen Rick Simon and Jumana Bauwens didn't return calls or e-mail messages for comment.