Mortgage rates, demand for loans dip

Mortgage rates eased this past week as economic uncertainty over the crisis in Japan and turmoil in the Middle East had investors seeking safety in bonds, including those that fund most mortgages.

Rates on 30-year fixed-rate mortgages averaged 4.76 percent with an average 0.7 point for the week ending March 17, down from 4.88 percent the week before and 4.96 percent a year ago, Freddie Mac said. Rates on 30-year fixed-rate loans have retreated in recent weeks after hitting a high for the year of 5.05 percent during the week ending Feb. 10. The 30-year fixed-rate hit an all-time low in Freddie Mac records — dating to 1971 — of 4.17 percent during the week ending Nov. 11.

Rates on 15-year fixed-rate loans averaged 3.97 percent this past week with an average 0.7 point — the best rate since December — down from 4.15 percent the week before and 4.33 percent a year ago. The 15-year fixed-rate loan hit a low in records dating to 1991 of 3.57 Looking back two weeks, a separate survey by the Mortgage Bankers Association (MBA) showed that borrowers were taking advantage of low rates, but mostly to refinance.

Demand for purchase loans was off 4 percent during the week ending March 11 when compared to the week before, and was down 15.5 percent from a year ago.

Applications for refinancings were up 0.9 percent from the previous week to the highest level since December, and requests for refinancings accounted for 66.4 percent of all mortgage applications.

Although many economists expect mortgage rates to rise this year, some have pushed back their timelines.

MBA economists in a March 15 forecast said they expected rates on 30-year fixed-rate loans will average 5 percent during the first and second quarter of this year, rising to an average of 5.3 percent in the third quarter, and 5.5 percent in the final three months of 2011.

Just last month, MBA economists were forecasting that rates on 30-year fixed-rate loans would hit 5.5 percent in the second quarter.

The most recent MBA forecast projects rates on 30-year fixed-rate loans will continue a gradual rise next year, climbing to an average of 6.2 percent in the final three months of 2012.

The Federal Reserve's Open Market Committee, which sets targets for short-term interest rates and sets policies for programs that also influence long-term rates, this past week signaled that it's not concerned about inflation.

The committee announced Tuesday that it will continue to buy Treasurys through the second quarter of 2011, until it reaches a target of $600 billion. That program has been dubbed "QE2," as it is the second round of "quantitative easing" implemented by the Fed to keep rates low and encourage borrowing.