For the week ending May 19, 30-year fixed rates averaged 4.61% with an average 0.7 point, down two basis points from last week. This brings the no-point rate at just below 4.80%.

Meanwhile, 15-year fixed rates slipped two basis points to 3.80%. Adjustable mortgage rates increased over the week with 5/1 hybrid ARMs gaining seven basis points to 3.48%, while one-year ARM rates clocked in at 3.15% from a record low of 3.11%.

"Fixed mortgage rates inched down for the fifth consecutive week as financial markets try to ascertain the current strength of the economy," said Frank Nothaft, vice president and chief economist at Freddie Mac. Noteworthy here is that 30- and 15-year fixed mortgage rates set new year-to-date lows.

While refinancing activity has increased over the past several weeks, most analysts expect that 30-year rates will need to decline through 4.5% to see a significant pickup in the Mortgage Bankers Association (MBA) refinance index. BNP Paribas analysts, for example, suggested this could raise the index to above 4000.

Yesterday, the MBA reported the refinance index at ~2568 for the week ending May 13. Beginning April 8, the index has jumped 33.5% as mortgage rates dropped from the 4.90% area.

With interest rates backing up since yesterday, the risk of a 4.5% mortgage rate and a surge in refinancing activity seems unlikely for now.

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