Interest rates on 30-year fixed-rate loans continue to drop into uncharted territory, but a surge in refinancings appears to be leveling off, two surveys of lenders suggest.
Rates on 30-year fixed-rate mortgage (FRM) loans averaged 5.1 percent with an average 0.7 point for the week ending Dec. 31, down from 5.14 percent last week, Freddie Mac said today in releasing results of its Primary Mortgage Market Survey.
The 30-year FRM averaged 6.07 percent a year ago, and has never been lower in the 37 years Freddie Mac has been conducting the survey. The survey tracks conventional, conforming loans. Rates on loans too large or too risky for purchase by Freddie Mac are higher.
Since the end of October, the 30-year FRM has declined by about 1.33 percentage points, representing savings of approximately $173 a month on a $200,000 loan. As a result, the number of refinance applications for conventional mortgages jumped more than 500 percent between the weeks ending on Oct. 31 and Dec. 26, said Freddie Mac chief economist Frank Nothaft.
The 15-year FRM this week averaged 4.83 percent with an average 0.7 point, down from 4.91 last week and 5.68 percent a year ago. The 15-year FRM has not been lower since March 25, 2004, when it averaged 4.7 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.57 percent this week, with an average 0.7 point, up from 5.49 percent last week but down from 5.78 percent a year ago.
One-year Treasury-indexed adjustable-rate mortgages averaged 4.85 percent this week, with an average 0.5 point, down from 4.95 percent last week and 5.47 percent a year ago.
Growth in applications for refinancings appears to have leveled off, according to another survey released today by the Mortgage Bankers Association.
For the week ending Dec. 26, an index tracking refinancing applications fell a seasonally adjusted 0.4 percent, the Mortgage Bankers Association said. Nevertheless, applications for refinancings accounted for 82.9 percent of total applications, down from 83.2 percent the previous week.
Applications for conventional purchase loans were up 1.1 percent, and the government purchase index, which primarily tracks FHA-backed loans, was up 2.2 percent.
Rates on conventional, conforming loans have been on the decline since the Federal Reserve announced on Nov. 25 that it would spend $600 billion to buy mortgage-backed securities (MBS) and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae.
Many people who might benefit from lower rates won’t be able to qualify for a refinance loan, however, either because they owe more than their home is worth or they don’t meet Fannie and Freddie’s underwriting standards (see story).
The Fed announced Tuesday that the MBS purchase program will kick off in early January, with up to $500 billion in purchases anticipated by the end of the second-quarter 2009. That could help keep mortgage rates down, although only fixed-rate agency MBS are eligible for the program. The program includes but is not limited to 30-year, 20-year and 15-year securities.
The New York Fed, which has hired BlackRock Inc., Goldman Sachs Asset Management, PIMCO and Wellington Management Company LLP to run the program, says it will adjust the pace of purchases based on "input from the investment managers about market conditions and the impact of the program."
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