In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Thursday, June 07, 2012

Record Low Mortgage Rates and Increasing Refinance Activity

by Calculated Risk on 6/07/2012 03:45:00 PM

Below is a graph comparing mortgage rates from the Freddie Mac Primary Mortgage Market Survey® (PMMS®) and the refinance index from the Mortgage Bankers Association (MBA).

Freddie Mac reported earlier today that 30 year mortgage rates had fallen to a record low 3.67% in the PMMS®.

And the MBA reported yesterday that refinance activity increased another 2 percent last week.

Earlier from Freddie Mac: Record-Setting Low Fixed Mortgage Rates Persist

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates falling to new all-time record lows for the sixth consecutive week ...

30-year fixed-rate mortgage (FRM) averaged 3.67 percent with an average 0.7 point for the week ending June 7, 2012, down from last week when it averaged 3.75 percent. Last year at this time, the 30-year FRM averaged 4.49 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 and 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 are there! The 30 year conforming mortgage rates were at 4.23% in October 2010, so a 50 bps drop would be 3.73% - and rates hit 3.67% last week.

There has also been an increase in refinance activity from borrowers with negative equity and loans owned or guaranteed by Fannie or Freddie.

Freddie Mac Mortgage Rate Survey The second graph shows the 15 and 30 year fixed rates from the Freddie Mac survey. The Primary Mortgage Market Survey® started in 1971 (15 year in 1991). Both rates are at record lows for the Freddie Mac survey, and rates for 15 year fixed loans are now below 3%.

Note: The Ten Year treasury yield is just off the record low at 1.65% (the record low was last week at 1.44%).