Mortgage rates hold for now, but expect increases

Mortgage rates are holding steady despite last month’s wind-down of a $1.25 trillion Federal Reserve program to buy up mortgage-backed securities.

Rates for 30-year fixed-rate mortgages averaged 5.06 percent with an average 0.7 point for the week ending April 29, down slightly from 5.07 percent last week but up from 4.78 percent a year ago, Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.

Rates on 30-year fixed loans have averaged about 5 percent over the first four months of this year, staying within a band of roughly a quarter percentage point and virtually matching 2009’s annual average, said Frank Nothaft, Freddie Mac’s chief economist.

The 15-year fixed-rate mortgage averaged 4.39 percent with an average 0.7 point, unchanged from last week but down from 4.48 percent a year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4 percent, with an average 0.6 point, down from 4.03 percent last week and 4.8 percent a year ago.

The 1-year Treasury-indexed ARM averaged 4.25 percent with an average 0.5 point, up from 4.22 percent last week but down from 4.77 percent a year ago.

Looking back to the week ending April 23, the Mortgage Bankers Association said demand for purchase loans was up a seasonally adjusted 7.4 percent from one week earlier as the end of the homebuyer tax credit approaches. Applications for loans backed by FHA and the VA accounted for nearly 49 percent of demand.

Demand for refinancings was down 8.8 percent, the MBA said. Applications for refinancings accounted for 55.7 percent of all applications — the lowest share since August 2009.

Although the Federal Reserve on Wednesday restated its intention to hold short-term interest rates at historic lows for "an extended period," mortgage rates are expected to rise gradually because the Fed has discontinued its purchases of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac (see story).

In a forecast published April 12, MBA economists projected that rates on 30-year fixed-rate loans will rise for the next 10 consecutive quarters, to an average of 5.8 percent in the final quarter of 2010, 6.3 percent in the fourth quarter of 2011, and 6.6 percent in the fourth quarter of 2012.

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