Freddie Mac reported that for the second week in a row, 30- and 15-year fixed-rate mortgages, as well as 5/1 hybrid ARM rates all set new record lows.

These decreases are a result of data reflecting that, "the economy struggles to gain momentum and inflation remains very low," according to Freddie Mac Chief Economist Frank Nothaft.

For the week ending July 1, the 30-year fixed rate plummeted 11 basis points to 4.58%, 15-year fixed mortgage rates were down nine basis points to 4.04%, and hybrid ARMs averaged 3.79% compared to 3.84% previously. Meanwhile, one-year ARM rates gained three basis points to 3.80%.

While these low rate levels should stimulate refinancing activity, it will remain relatively muted given the tight underwriting standards, poor economic conditions, employment uncertainty, and adverse home price valuations relative to mortgage balances.

Credit Suisse analysts also said in their research that the, "widening in primary/secondary spread could depress the 2.80% 10s threshold for 4.50% mortgage rates."

At this time, they believe refinancings will remain muted unless mortgage rates rally another 25 basis points.

For the week ending June 25, the Mortgage Banker Association's Refinancing Index rose nearly 13% to ~3613.

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