Rates take break from steady rise

After eight weeks of incremental increases, mortgage rates appear to have stabilized -- at least for now. U.S. Treasury securities, which have been oversold on fears of a rate hike, have factored in that news and traders appear to have accepted the inevitable.

Little economic news broke over the week, but what there was benefited Treasuries, as did global pressures that drew funds to the safe haven of government issues. A big one-day rally sent Treasury yields back to levels from more than a week ago.

Even though yields have since edged up, they are low enough that lenders held mortgage rates near last week's levels.

The 30-year fixed-rate mortgage (based on zero discount points) remains just above 6.125 percent, while the 15-year fixed-rate edged above 5.5 percent. The introductory rate on the one-year adjustable rate is just below 3.75 percent.

Higher mortgage rates took their toll on mortgage applications for the week ended May 14. Purchase applications fell 8.1 percent, while refis plunged 16.8 percent, according to the Mortgage Bankers Association. Refinancers accounted for only 37 percent of mortgage applicants, while the number of borrowers applying for adjustable-rate mortgages soared to a four-year high of 35 percent.

News on the housing market was mixed with housing starts falling 2.1 percent in April to a still-healthy annual rate of 1.9 million units. Building permits, on the other hand, rose 1 percent to an annual rate of just below 2 million units.

Two regional manufacturing reports, New York state and Philadelphia, came in significantly below expectations, fueling short-term Treasury rallies. First-time jobless claims rose to 345,000 for the week ended May 14. But the more closely watched four-week average, which smoothes volatility, hit 333,450 -- the lowest level in 3 1/2 years.

The last week of the month is loaded with economic reports, including manufacturing, consumer confidence, durable goods orders, consumer spending, and new and existing home sales. The price of oil will also continue to influence the markets.

Interest.com is a national publisher of mortgage rates and information.

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