Mortgage rates declined for the second straight week and are at their lowest level in five weeks.

According to Freddie Mac, the 30-year fixed mortgage rate averaged 4.71% with an average 0.8 point, down six basis points from last week. This places the no point rate slightly under 5%. 

Current rate levels remove a significant percentage of credit-eligible borrowers from the refinancing window and this has been demonstrated in the sharp decline in refinancing activity since mid-November when mortgage rates started to climb from a record low of 4.17%. 

The recent declines, however, have led to limited stimulation in activity with the Mortgage Bankers Association's Refinance Index increasing nearly 9% to ~2221 in the two weeks ending Jan. 7.

According to Scott Buchta, head of investment strategy at Braver Stern Securities, the cuspy 5% coupons, specifically, will likely account for much of the current noise in the Refinance Index.  He stated that, "as the effective mortgage rate moves between 4.85% and 5.20%, every five basis point move in rates equates to approximately $75 billion in loans that move in and out of the 40 basis point refi window."

In other loan options, Freddie Mac reported 15-year fixed mortgage rates were unchanged at 4.13%, 5/1 hybrid ARMs slipped three basis points to 3.72%, and one-year ARM rates averaged 3.23% compared to 3.24% previously.

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