Thursday, January 12, 2012

Record Low Mortgage Rates compared to Refinance Index

by Bill McBride on 1/12/2012 04:11:00 PM

From Freddie Mac: Mortgage Rates Continue Trend of Record-Breaking Lows

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates easing to new all-time record lows for all products covered in the survey ... The average for the 30-year fixed mortgage rate has been below 4.00 percent for six consecutive weeks.
30-year fixed-rate mortgage (FRM) averaged 3.89 percent with an average 0.7 point for the week ending January 12, 2012, down from last week when it averaged 3.91 percent. Last year at this time, the 30-year FRM averaged 4.71 percent.
Mortgage rates and refinance activity Click on graph for larger image.

This graph shows the MBA's refinance index (monthly average) and the the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey®.

The Freddie Mac survey started in 1971. Mortgage rates are currently at the record low for the last 40 years.

It usually takes around a 50 bps decline from the previous mortgage rate low to get a huge refinance boom - and rates might not fall that far - 30 year conforming mortgage rates were at 4.23% in October 2010, so a 50 bps drop would be 3.73%.

However there will probably be a significant increase in refinance activity in March from borrowers with negative equity and loans owned or guaranteed by Fannie or Freddie (the automated HARP starts in March).