Editor’s note: This story has been corrected to note that mortgage rates hit record lows during the week ending Nov. 11.
Demand for purchase loans held up during the final two weeks of 2010, even as rates on 30-year fixed-rate mortgages approached 5 percent before retreating.
Demand for purchase loans was up 3.1 percent from the week before during the week ending Dec. 24 and was essentially flat during the week ending Dec. 31, falling by 0.8 percent, the Mortgage Bankers Association said in releasing the results of its Weekly Mortgage Applications Survey.
Those numbers are seasonally adjusted, and also include an adjustment to account for the Christmas and New Year’s Day holidays.
Applications for refinancings were down 7.2 percent for the week ending Dec. 24 but up 3.9 percent in the final week of the year.
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.93 percent during the week ending Dec. 24, up from 4.84 percent the week before, while points decreased from 0.96 to 0.63 (including the origination fee).
For the week ending Dec. 31, 2010, the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.82 percent with points increasing to 1.11, the MBA said.
The average contract interest rate for 15-year fixed-rate mortgages averaged 4.23 percent during the final week of the year, up from 4.22 percent the week before, with points decreasing from 1.34 to 1.00.
According to another weekly survey conducted by Freddie Mac, rates on 30-year fixed-rate mortgages hit a record low of 4.17 percent during the week ending Nov. 11, and averaged 4.7 percent for the year as a whole.
In a Dec. 17 forecast, the MBA projected that rates on 30-year fixed-rate loans will average 5.3 percent in 2011, rising to 5.5 percent during the fourth quarter.
A gradual increase in mortgage rates isn’t expected to stunt demand for purchase loans — some analysts think rising rates may spur some buyers to get off the fence to lock in an affordable loan. But rate increases will probably spell the end of the refinancing boom.
The MBA projects demand for purchase loans will grow by 30 percent in 2011, to $615 billion, and by another 21 percent in 2012, to $981 billion. But the MBA is forecasting a 66 percent decrease in refinancings in 2011, with refi volume falling from more than $1 trillion in 2010 to $352 billion this year.