Mortgage rates slipped a few basis points in the week ending Jan. 6. According to Freddie Mac, 30-year. fixed mortgage rates averaged 4.77% with an average 0.8 point, down nine basis points from last week. Still, the no-point rate remains near 5% and removes many borrowers from the refinancing window.
In fact, according to FTN Financial analysts, less than 18% of the 30-year conventional market is refinanceable — assuming 50 basis points are in the money — after taking loan balance, LTV and FICO into account.
Meanwhile, Scott Buchta, managing director and the head of investment strategy at Braver Stern Securities, said that at a 5.05% effective rate, 45% of the 30-year conforming universe is out of the 40 basis point refinancing window, and factoring in the higher closing costs, more than half of the universe likely is out of the money.
The higher rates have dimmed refinancing activity as well. For the week ending Dec. 31, the Refinance Index stood at ~2117, its lowest level since the end of April.
For 2011, expectations are for rates to generally increase — although to remain historically attractive. In addition, poor housing values, tight credit standards and mortgage banker capacity constraints continue to limit many borrowers' ability to take advantage of mortgage rates.
At this time, refinancing share of total applications is projected to average 42% in the 4Q11 from an estimated 70% in 4Q10. This will keep prepayments benign.
Freddie Mac also reported that 15-year fixed rates fell seven basis points to 4.13%, while 5/1 hybrid and one-year ARM rates were down two basis points to 3.75% and 3.24%, respectively.