Freddie Mac reported 30-year fixed mortgage rates eased back to 3.91% with an average 0.8 point in the week ending Jan. 5. This is from 3.95% and matches the record low set in the week ending Dec. 22.

With the no-point rate at 4.11%, some borrowers underlying the 4.0% coupon have an incentive to refinance. To be fully in the money, however, rates need to fall another 25 basis points to around 3.75%, according to recent email commentary by Sandler O'Neill + Partners Managing Director Scott Buchta.

Freddie Mac noted this was the fifth straight week that mortgage rates held below 4.0%. In its latest economic forecast, the GSE's economists predict the 30-year fixed mortgage rate to average 4.20% in 1Q12 and climb to an average of 4.8% by 4Q12.

Refinancing activity is expected to see a bounce higher this week after slipping 2.5% to 3448 in the week between Christmas and New Year.  The most recent high on the Refinance Index was just under 4000 in early November when mortgage rates were at 4.0%. However, the index is unlikely to reach that unless mortgage rates fall further.   

In other mortgage terms, 15-year fixed rates slipped one basis point to 3.23%, two basis points above its record low. Meanwhile, 5/1 hybrid ARM rates declined to 2.86% from 2.88% and is one basis point above its low. The one-year ARM rate rose two basis points to 2.80%, which is just three basis points from its historical low.

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