Freddie Mac reported the sixth straight week of declines on 30-year fixed rate mortgages to a new record low of 4.54% for the week ending July 29 from 4.56% last week.
Meanwhile, 15-year fixed rates are also at new lows of 4.00%, down three basis points from the previous report.
On the adjustable side, 5/1 hybrid ARMS declined three basis points to 3.76%, while one-year ARMs averaged 3.64% compared to 3.70% previously.
Despite rate levels, mortgage application activity has just been modestly response with yesterday's report from the Mortgage Bankers Association actually reporting a 6% decline in the Refinance Index to ~3915.
As has been noted many times already and recently updated in the latest Beige Book, lending standards remain tight and many borrowers are unable to refinance. This a result of their mortgage is substantially greater than the value of their home.
Given the limited success of the existing government programs, the further prospects of home price declines into 2011, and historically low mortgage rate levels currently, the government is facing increased pressure to help homeowners take advantage of current rate levels.
Making the rounds this week in Street research has been the possibility of a government-induced refi event. Specifically, Morgan Stanley economists have suggested the government could address this issue by "merely recognizing its existing guarantee on the principal value of a large part of the mortgage market - the mortgages that are backed by Fannie, Freddie and Ginnie - and acted to streamline the refi process."
The Morgan Stanley economists said that in addition to helping homeowners, the economy would benefit as mortgage payments would be reduced, freeing up money to be spent elsewhere.
The prospects of such a government action has already spooked the MBS market and mortgage investors. The more attractive mortgage rates that many borrowers cannot take full advantage of would seem to add to those fears.