30-Year Rates Back Below 5 Percent: MBA

By:: Kirk Haverkamp | March 03, 2010

More consumers moved to refinance their mortgages last week as rates once again dipped below the 5 percent mark, according to new information from the Mortgage Banker’s Association.

Applications to refinance existing mortgages rose a seasonally adjusted 17.2 percent from the previous week, as the average interest rate on 30-year fixed rate mortgages fell to 4.95 percent, down from 5.03 percent the week before.

Mortgages for home purchases also increased by 9.0 percent from the week before, for a combined 14.6 percent increase in overall mortgage activity. Refinances made up nearly seven out of 10 mortgage applications.

Home sales mortgage applications tend to respond to changes in mortgage rates more slowly than refinances, due to the lead time involved in finding a home and making an offer. Homeowners seeking to refinance generally have more flexibility to respond quickly to drops in interest rates.

Interest rates on other loan types also declined in the current survey, with the average rate on 15-year fixed-rate loans falling to 4.27 percent, down from 4.35 percent the week before and its lowest since the end of November.

Consumer interest tends to intensify whenever 30-year rates fall below the 5 percent mark, as they frequently have over the past year. The current interest may be intensified by the general expectation that rates will rise significantly once the Federal Reserve ends its program of purchasing mortgage-backed securities at the end of this month.

Refinance activity has been relatively subdued in recent weeks, with the four-week moving average up only 1.8 percent. Applications for home purchases over the same period are down 2.7 percent.

The current MBA survey covers the week ending last Friday, Feb. 26.

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