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Freddie Mac and the Mortgage Bankers Association are both reporting 30-year rates near 5% and 15-year Fixed Rate Mortgage (FRM) rates below 5% for a second week. Buyers have responded aggressively to the lower rates, with mortgage applications for home purchases up more than 10% last week.

With prices dropping in both the existing home and new home markets according to reports released earlier in the week and consumers real disposable income rising last month, housing affordability is considerably improved – a good sign for sales early next year. According to Frank Nothaft, Freddie Mac chief economist:

Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac’s survey began in 1971.

Freddie Mac Conforming Rates At a Glance

• 30-year FRM: 5.14%, 0.8 point
• 15-year FRM: 4.91%, 0.7 point
• 5-year hybrid ARM: 5.49%, 0.6 point
• 1-year ARM: 4.95%, 0.6 point

Average Mortgage Rates from Mortgage Bankers Association

30-year FRM: 5.04%, 1.17 points*
15-year FRM: 4.91%, 1.03 points
1-year ARM: 6.36%, 0.28 points

* Points reported by Mortgage Bankers Association in this survey include origination fees as well as traditional discount points. Average rates are based on an 80% LTV loan. This means a loan amount no more than 80% of the property value as determined by the lower of the purchase price or appraised value. Typically this means a 20% down payment, though an 80% loan can also be achieved with a second mortgage carried by the seller or a third party lender for the difference between the actual down payment and 20%.

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Near Record Low Mortgage Rates Boost Mortgage Applications

WASHINGTON, D.C. (December 24, 2008) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending December 19, 2008.  The Market Composite Index, a measure of mortgage loan application volume, was 1245.4, an increase of 48.0 percent on a seasonally adjusted basis from 841.4 one week earlier.  On an unadjusted basis, the Index increased 50.2 percent compared with the previous week and was up 124.6 percent compared with the same week one year earlier.
The Refinance Index increased 62.6 percent to 6758.6 from the previous week and the seasonally adjusted Purchase Index increased 10.6 percent to 316.5 from one week earlier.  The Conventional Purchase Index increased 17.7 percent while the Government Purchase Index (largely FHA) decreased 3.4 percent.
 
The four week moving average for the seasonally adjusted Market Index is up 28.8 percent.  The four week moving average is up 4.5 percent for the seasonally adjusted Purchase Index, while this average is up 42.0 percent for the Refinance Index.
The refinance share of mortgage activity increased to 83.2 percent of total applications from 76.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 0.8 percent from 1.1 percent of total applications from the previous week.
LONG-TERM RATES FALL FOR EIGHTH CONSECUTIVE WEEK SETTING ANOTHER NEW LOW
Shorter-Term Rates Are Mixed
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.14 percent with an average 0.8 point for the week ending December 24, 2008, down from last week when it averaged 5.19 percent. Last year at this time, the 30-year FRM averaged 6.17 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

“Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac’s survey began in 1971,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Real GDP growth fell 0.5 percent in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980. The market consensus calls for an even larger decline in the last three months of the year.
“The housing market, meanwhile, continues to contract. Existing home sales (excluding condominiums and co-ops) fell 8.6 percent in November to 4.0 million houses (annualized) in November, representing the slowest pace since July 1997. Moreover, the median sales price fell 12.8 percent from November 2007, the largest 12-month decline since records began in January 1968, according to the National Association of Realtors®.”

New Home Sales

Existing Home Sales