'04 mortgage rates more volatile, but remain low
By Janice Chamberlain -- Furniture Today, April 18, 2004
MCLEAN, Va. — MCLEAN, Va. — Although mortgage rates bounced around last year, Freddie Mac said 2003 was another record year for the mortgage business. Mortgage rates remained low in the first three and a half months of 2004, but are slightly more volatile than in the same period last year.
Freddie Mac, the U.S. Congress-chartered corporation that buys mortgages from lenders and repackages them into investor-purchased securities, reported the average rate for a 30-year fixed-rate mortgage was 5.79% for the week ended April 8, up from 5.52% the prior week.
The April 8 rate was coupled with 0.7 points, while the April 1 rate had 0.6 points.
The high point for 30-year fixed-rate mortgages was 1981's 16.63%. The June 2003 rate of 5.23% is the all-time low since Freddie Mac began its weekly survey. The 1981 rate was coupled with 2.1 points, while the June 2003 rate required just 0.6 points.
The low point for the first quarter of 2004 was 5.38%, reported March 18, combined with 0.7 points.
Freddie Mac also reported that 15-year fixed-rate mortgages and 1-year adjustable-rate mortgages have dropped in recent weeks. The April 8 weekly 15-year rate was 5.12%, compared with 4.84% in the previous week. The current weekly 1-year adjustable rate is 3.65%, measured against 3.46% for the week ended April 1.
The April 8 15-year rate included 0.7 points and the April 1 comparable rate was matched with 0.6 points. The April 8 1-year adjustable rate was combined with 0.5 points and the comparable points for the prior week were 0.6 points.
Frank Nothaft, Freddie Mac's chief economist, said, "Low interest rates are helping the housing market continue its strong performance … with total home sales running close to record levels and housing starts running ahead of 2003's blistering pace.
"Home prices should grow at slightly higher rates in 2004 than in 2003 due to increasing demand for homes — as the economy improves and interest rates stay low — and tight supplies of homes for sale," he said.
Nothaft expects house price growth, as measured by the Conventional Mortgage Home Price Index, to come in at 8.9% for 2004. Strong demand for housing, accompanied by low mortgage rates and low inventories of homes for sale (currently at a little over a four-month supply) will keep house prices growing robustly and boost housing equity in homeowners' balance sheet.
Housing starts hit a 25-year peak of 1.85 million units in 2003, and Freddie Mac expects about the same level in 2004. However, the annualized first two months of the year exceeded last year's results, and low interest rates could spur construction activity to a record high in 2004.
Freddie Mac estimates that, coupled with relatively very low mortgage rates, total home sales will likely set a record again this year. The corporation forecasts total home sales to come in at 7.27 million units in 2004, a 1% gain over 2003.
At present mortgage rates, Freddie Mac projects that total single-family mortgage originations should exceed $2.8 trillion in 2004, and lead to an increase in the refinance share of applications to 52%.
Over the next decade, Freddie Mac estimates 50 million families will take on new mortgages.
Since the stockholder-owned corporation was chartered in 1970, Freddie Mac has financed homes for nearly 30 million families, equal to one of every six homes in the United States.
Since April 1971, Freddie Mac has surveyed lenders across the nation weekly to determine the average 30-year fixed-rate mortgage rate. In 1984, the 1-year adjustable-rate mortgage was added to the survey, and the 15-year fixed-rate mortgage was included beginning in 1991.
Currently, 125 lenders, representing commercial banks, thrifts and mortgage-lending companies, are surveyed each week. Their responses are weighted by Freddie Mac in proportion to the level of mortgage business that each commands nationwide.
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