Freddie Mac reported its 30-year fixed mortgage rate slipped just two basis points to 5.10% this week, while 15-year fixed rates were unchanged at 4.80%.

On the adjustable side, 5/1 hybrid ARMs rose to 5.27% from 5.24%, as one-year ARMs fell to 4.90% from 4.92%.

With mortgage rates remaining above 5%, mortgage application activity is expected to show limited response — despite very attractive rate levels on an historical basis. This is a result of underwriting standards remaining very tight while home prices still falling.

In addition, the Federal Reserve has said that it wants to push rates towards 4.5% which will likely encourage many borrowers to wait.

Yesterday"s mortgage application report from the Mortgage Bankers Association (MBA)showed the sensitivity of borrowers to rate levels.

For the week ending Jan. 23, the Refinance Index plunged 48% to 3373.9 as mortgage rates moved from 4.96% to 5.12%.

However, in addition to the impact related to higher mortgage rates, Barclays Capital analysts also said that the 1/2 day seasonal adjustment for the Martin Luther King holiday may have been too little and added to the noise of the index.

Also, the commotion around the Presidential inauguration could have played a role in the decline as the nation's attention was focused on that historical event.

For the month of January, the 30-year fixed mortgage rate averaged 5.05% compared to 5.29% in December. Through last week, the MBA's Refinance Index has averaged 5760 so far this month, 5.4% higher than the previous month.

At this time, speeds in February are predicted to increase close to 50%, while March gains are slight.

However, the recent sharp decline in refinancing activity could lead to downward revisions to many analysts' expectations.  Credit Suisse analysts alluded to this when they noted, "If the refinance index is sustained at current levels, speeds for February and March could be essentially unchanged from January, reflecting a 10% decline versus our current forecast."

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