Mortgage rates continued their slide downward, but the 30-year has yet to break through 5%. 

According to Freddie Mac, the 30-year fixed mortgage rate averaged 5.01%, down from 5.10% the previous week and 5.87% versus a year ago. 

The GSE's press release said the rate "has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971."

The 15-year fixed mortgage rates recorded the largest decline in the survey at 21 basis points to 4.62%, while 5/1 hybrid ARM rates were eight basis points lower to 5.49%. One-year ARM rates, however, were 10 basis points higher to 4.95%.

Although the continued improvement in mortgage rates will keep application activity elevated, many borrowers are probably expecting further rate declines in the weeks to come and would likely hold off on applying for a refinancing. 

Yesterday, the Mortgage Bankers Association (MBA) reported its Refinance Index fell 12% to 5905 for the week ending January 2 despite further declines that week in mortgage rates. 

While the holidays and outlook for lower rates could have been influences, tight underwriting conditions continue to exist - as mentioned in the latest Federal Open Market Committee minutes. 

The minutes also noted that while there was some easing for prime borrowers on financing conditions since the Federal Reserve announced its MBS purchase program, the market for nonconforming loans remained impaired. 

It will likely take the removal of the reappraisal requirement on refinancings for the MBA Refinance Index to come to a level commensurate with the historical low mortgage rate levels and allow those borrowers to refinance.

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