Freddie Mac reported a two-basis-point increase from record low levels in fixed-rate mortgages, while adjustable rate mortgage rates moved to new record lows. This was the first increase in five weeks.

For the week ending Oct. 21, 30-year fixed mortgage rates averaged 4.21% with an average 0.8 point. This placed the no-point rate at around 4.41% - a level that still offers an attractive incentive for underlying borrowers of newer 30-year 4.5s to refinance.

Meanwhile, 15-year fixed rates reported at 3.64%. The 5/1 hybrid ARMs slipped two basis points to 3.45% and one-year ARMs plunged 13 basis points to 3.30%.

Yesterday, the Mortgage Bankers Association (MBA) reported an 11% decline in refinancing activity to 4491 in the week ending Oct. 15 - despite record low mortgage rates - following a 21% jump in the previous week to 5060.

Capacity constraints at mortgage bankers do appear to be factoring in with the primary-secondary spread backing up to above 100 basis points.

Barclays Capital analysts recently said that, "origination capacity can only handle about a 5000 refinancing index," and the recent performance of the Refinance Index and primary-secondary spreads would seem to support this.

The MBA report did show, however, borrowers responding to declines in adjustable rate mortgage rates as the share of ARMs to total applications increased to 5.8% from 5.4%.

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