Rates hardly move in paucity of economic data
By Holden Lewis • Bankrate.com

In a week with little economic data, mortgage rates moved just a little.

The benchmark 30-year fixed-rate mortgage rose 3 basis points to 6.72 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index was 5.65 percent; four weeks ago, it was 6.67 percent.

The benchmark 15-year fixed-rate mortgage rose 1 basis point to 6.32 percent. The benchmark 5/1 adjustable-rate mortgage rose 2 basis points to 6.29 percent.

There wasn't much economic news to move the markets. Tuesday's consumer confidence report from the Conference Board showed that consumers get a sinking feeling whenever they see a sign advertising gasoline prices. Confidence dipped in May from April's four-year high. Nevertheless, consumers kept spending as if the future were bright, even as they said they would cut down on purchases of houses and cars.

Bond investors, who influence mortgage rates, don't pay a lot of attention to consumer confidence surveys, but they do watch the monthly employment report. That comes out June 2, and the bond market has been waiting for it. A stronger-than-expected report could result in rising mortgage rates, while a weaker-than-expected report could be followed by a drop in rates.

While waiting for the employment report to come out at the end of the week, Wall Street has time to digest the minutes from the May 10 meeting of the Federal Reserve's rate-setting committee. The minutes were released Wednesday, and if investors hoped for clear guidance about the future direction of short-term interest rates, they were disappointed.

"Given the risks to growth and inflation, Committee members were uncertain about how much, if any, further tightening would be needed after today's action," the Fed said in the minutes of the meeting, at which the central bank raised the federal funds rate by another quarter point.

The rate-setting committee decided that more rate hikes might be necessary -- but then again, they might not be necessary.

Decisions on whether to raise short-term rates "will depend importantly on the evolution of the economic outlook as implied by incoming information."

In other words, the folks at the Fed are waiting for that employment report (and other economic data) as eagerly as anyone on Wall Street.

One thing is for sure: As rates have gone up over the last 52 weeks, fewer people have been getting mortgages. In Bankrate's weekly survey, the average rate on the 30-year fixed is up 1.07 percentage points compared to a year ago, and the 5/1 ARM has risen 1.14 percentage points.

Over the same period, total home loan applications are down 22.4 percent, according to the Mortgage Bankers Association.

Purchase applications fell about 14 percent, and refinance applications plunged 34 percent.

The drop in refinance applications is easy to understand: Rates went up, so fewer people refinanced. Homeowners are still refinancing in large numbers, though, often because they want to convert their adjustable-rate mortgages to fixed-rate loans.