Thanks to continued, ultra-low interest rates, Freddie Mac is feeling quite bullish about loan production for the remainder of 2012, hiking its origination forecast by $200 billion to $1.65 trillion for the year.

The GSE is now more optimistic about loan production than both Fannie Mae ($1.34 trillion) and the Mortgage Bankers Association (MBA) ($1.29 trillion).

If Freddie’s prediction comes true it means the industry will have a better year than in 2011 when fundings topped $1.45 trillion. (The $1.45 trillion figure was compiled by National Mortgage News and the Quarterly Data Report.)

Many lenders are reporting continued strong application volumes thanks to both low interest rates and the government’s HARP 2.0 program.

The average rate for 15- and 30-year fixed-rate mortgages, as well as the five-year Treasury-indexed hybrid ARMs, all dropped to new record lows during the week ending July 19, according to new figures compiled by Freddie.

The average rate on a 30-year FRM dropped three basis points to 3.53% while the 15-year rate sank even lower to 2.83%. The five-year Treasury hybrid rate slid five basis points to 2.69%.

During the week, the rate-indicative 10-year Treasury yield had at one point matched its all-time low of 1.44%. It then rebounded a bit. At noon the 10-year yield was at 1.49%.

"With little signs of inflation and the Federal Reserve's ‘Operation Twist’ keeping U.S. Treasury bond yields in check, fixed mortgage rates are remaining low,” said Frank Nothaft, vice president and chief economist for Freddie Mac.

But Freddie found that not all rates fell last week. The rate charged on one-year Treasury ARMs remained the same at 2.69%, but most consumers are not opting for that loan anyway, the GSE noted.

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