Mortgage rates continued to set new record lows this week in response to the Federal Reserve's buying program.
According to Freddie Mac, the 30-year fixed mortgage rate averaged 4.96% compared to 5.01% the previous week, while 15-year fixed mortgage rates were a tad higher at 4.65% versus 4.62% previously.
ARM rates recorded the largest declines with 5/1 hybrid ARM falling 24 basis points to 5.25% and one- year ARMs declining six basis points to 4.89%.
Mortgage rate levels should keep application activity elevated.
Yesterday, the Mortgage Bankers Association (MBA) reported a 26% surge in the Refinance Index to 7414 for the week ending Jan. 9 in response to the steady decline in mortgage rates over recent weeks.
Despite the pick-up in activity, anecdotes from yesterday's Beige Book suggested that many loans will likely not close and, with the prospect of further declines in home prices, new home buyers are better off waiting. This is specifically related to the housing market, the report said.
"Conditions in residential real estate markets continued to worsen in most Districts. Reduced home sales, lower prices, or decreases in construction activity were noted in many Districts," the report said. "Commercial real estate markets deteriorated in most Districts, with weakening construction noted in several Districts. Overall lending activity declined in several Districts, with tight or tightening lending conditions reported in most Districts."
Regarding the home price outlook, a recent report from Citigroup Global Markets estimated a further decline of 15% nationally.
