Freddie Mac reported 30-year fixed mortgage rates set new historical lows for the week ending June 21 at 3.66% with an average 0.7-point.

However, conventional refinancing is expected to show limited activity despite the new lows. It is typically hard for a high level of refinancing to be sustained unless rates drop significantly further.

For example, in February when rates hit a new low of 3.87%, the Refinance Index hit 4538, its highest level since mid-August 2011. It then subsequently declined over the next six weeks even though mortgage rates remained below 4.0%. In August 2011, the index surged to 4867 - its highest level since October 2010's 5060 print, as mortgage rates improved to 4.30% area from nearer 5.0% through the early part of 2011.

Also in yesterday's report from the Mortgage Bankers Association, the Conventional Refinance Index dropped 15.6% in the week ending June 15, following an 18% increase in the previous week in response to new historical lows of 3.67%.

In other mortgage programs, 5/1 hybrid ARMs set a new record low 2.77%, down three basis points from last week. Meanwhile, 15-year fixed averaged 2.95%, three basis points improved over the week and just one basis point above its low. The one-year ARM rate was down four basis points to 2.74% and is four basis points from matching its historical low.

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