Mortgage Rates Remain Near Record Lows
November 1, 2012
Freddie Mac reported a slight decline in mortgage rates for the week ending Nov. 1. The 30-year fixed mortgage rate averaged 3.39% versus 3.41% last week. Since hitting a record low of 3.36% in the first week of October, 30-year rates have held to narrow range of 3.37% and 3.41%.
The 15-year fixed mortgage rates also slipped two basis points to 2.70%, while ARM rates were a basis point lower to 2.74% on 5/1 hybrids and 2.58% on one-year.
Yesterday, the Mortgage Bankers Association (MBA) reported refinancing activity in the week ending Oct. 26 fell 6% to 4466, its lowest level since the end of August. In addition, in the four weeks since hitting a 3-1/2 year high of 5888 at the end of September, activity has fallen by 24%.
In a report last week, Credit Suisse analysts said the recent declines seemed large. They pointed out that borrowers who did not have the option to relock after the Federal Open Market Committee's QE3 news may have pulled out in order to benefit from the rates rally. So the late September/early October refinance index levels may have been inflated by these borrowers re-applying, "which makes the subsequent decline appear large as well."
They also suggested that refinance activity associated with Home Affordable Refinance Program (HARP) applications may also be lower due to "a strategic slowdown" by lenders as they wait for the January 1, 2013 effective date for the new reps & warranty framework. Of note, however, the MBA has not reported on HARP application activity in a few weeks to gauge this.
But given the plausibility, the MBS analysts cautioned that speed declines in December on cuspy coupons "may be less pronounced than what is implied by the refi index."
Bank of America Merrill Lynch analysts also said the decline in activity after the recent pop in response to QE3 should not be interpreted that QE3 is not working.
As the Federal Reserve is likely to be involved in buying MBS for quite some time, they expect the refinance "wave" to be one of low intensity but rising steadily, and long in duration.