Mortgage rates declined for the second week in a row, but remain above 5% for 30-year fixed mortgage rates, well off early December's record low of 4.71%.
They are also substantially above the 4.50% level that analysts said is needed to cause a significant refinancing response.
According to Freddie Mac's weekly survey, the 30-year fixed mortgage rate averaged 5.06% with an average 0.7 point for the week ending Jan. 14, down three basis points from last week. With mortgage rates remaining above 5%, refinancing response for the week ending January 15 is likely to remain muted.
Yesterday, the Mortgage Bankers Association (MBA) reported a 22% jump in the Refinance Index to 2407 for the week ending Jan. 8, which was primarily related to a bounce back from the traditional year-end slowing due to the holidays.
Meanwhile, 15-year fixed mortgage rates fell five basis points to 4.45% and 5/1 Hybrid ARMs dropped 12 basis points to 4.32%. One-year ARM rates, however, were higher by eight basis points to 4.39%.
The outlook for mortgage rates in 2010 is for a gradual quarterly increase on average with rates predicted to average 6% in the third quarter according to the MBA's latest outlook. They project further gains into year-end with Q4 averaging 6.1%.
Contributing to the higher mortgage rates outside of the Fed"s exit from MBS purchases are higher yield requirements from private investors to make them more competitive to alternative asset classes and an increase in Treasury yields due to the high deficit and an improving economy.
Partly a result of higher mortgage rates than previously projected, the MBA expects total mortgage originations to total $1.278 trillion in 2010 versus a previous projection of nearly $1.5 trillion. Mortgage originations in 2009 totaled over $2.0 trillion.
