Refinancing peaks up

The sustained drop in mortgage rates, in the face of the Federal Reserve's
tightening of short-term rates, has surprised many economists including
Mr. Greenspan. The May employment report came in at less than half of
what was expected last month, which pushed bond yields -- and mortgage
rates -- down further.

The fall in mortgage rates has prompted many homeowners to refinance
yet again. The Mortgage Bankers Association said this week that the
refinancing share of mortgage-application activity hit nearly 43% in the
week ended June 3. This is its best level in three months. The decline in
fixed rates also has also reduced demands for adjustable-rate loans. The
ARM share of activity decreased to 31.7% of total applications from
33.3% the previous week.

The low-interest-rate environment has also prompted revisions to home
sales forecasts for 2005. The National Association of Realtors this week
revised its outlook upward, saying home sales will hit records again this
year, with new-homes sales up 3.2% to 1.24 million units and existing
home sales climbing 1.6% to 6.89 million. Previously the Realtors' group,
had predicted that home sales would slip 2% to 3% this year, based on
forecasts for rising interest rates.

Fixed Rate: The mortgage agency Freddie Mae found that the national
average interest rate on the benchmark 30-year fixed-rate mortgage fell
to 5.56% in the week ending Thursday. In its weekly rate survey, the
agency also found the average for the 15-year fixed-rate loan fell to
5.14% from 5.2% the week earlier. The 30-year loan required the
payment of an average 0.6 point to achieve the rate; the 15-year needed
0.5 point.
[Note: A point is 1% of the loan amount, charged as prepaid interest].

Adjustable Rate Mortgage (ARM): Five-year Treasury-indexed
hybrid adjustable-rate loans averaged 5.01%, down from 5.07%.
One-year Treasury-indexed ARMs fell to 4.21% from 4.26%. The hybrid
needed 0.5 point and the ARM 0.7 point on average.