Freddie Mac reported new lows on 30- and 15-year fixed mortgage rates for the week ending May 10. The 30-year fixed slipped one basis point to 3.83% while 15s were two basis points lower to 3.05%.

With the no-point rate at 4.01% on 30-years, borrowers underlying 4.0% and, to some extent, 3.5% coupons have an increased incentive to refinance that should provide some modest response to refinancing activity.

Still, it is likely to be limited. As the GSE pointed out in their press release, since December 8, 2011 the 30-year fixed rate has averaged below 4.0% with the exception of one week. So borrowers have had plenty of opportunity to refinance.

Yesterday, the Mortgage Bankers Association (MBA) reported its Refinance Index rose 1.3% to 3735 for the week ending May 4. This remains well below its near 4000 average so far in 2012 with the range at 3438 and 4538.

The April prepayment report highlighted essentially the burnout showing in lower/post-Home Affordable Refinance Program cohorts as mortgage rates have held to a narrow range of 3.83% to 4.08% for the past six months.

This trend will likely continue in the May prepayment report with initial indications of speeds on 30-year FNMA 4.0% through 5.0% coupons increasing 1%-2% from April with a higher day count factoring in as well.

On the adjustable mortgage side, 5/1 hybrid ARMs fell four basis points to 2.81% while one-year ARM rates increased to 2.73% from 2.70%.


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