Mortgage rates expected to mostly stay put in 2013

Refinancings still account for most home loan originations

By Inman News, Thursday, January 3, 2013.

<a href="http://www.shutterstock.com/pic.mhtml?id=120617356" target="_blank">2013</a> image via Shutterstock.

2013 image via Shutterstock.

Mortgage rates remained near historic lows this week, but more than eight out of 10 home loan applications submitted in recent weeks have been for refinancings, surveys by industry groups show.
Rates on 30-year fixed-rate mortgages averaged 3.34 percent with an average 0.7 point for the week ending Jan. 3, down from 3.35 percent last week and 3.91 percent a year ago, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. Rates on 30-year fixed-rate loans hit a low in Freddie Mac records dating to 1971 of 3.31 percent during the week ending Nov. 21.
For 15-year fixed-rate mortgages, rates averaged 2.64 percent with an average 0.7 point, down from 2.65 percent last week and 3.23 percent a year ago. Rates on 15-year fixed-rate loans hit a low in Freddie Mac records dating to 1991 of 2.63 percent during the week ending Nov. 21.
Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.71 percent with an average 0.6 point, up from 2.70 percent last week but down from 2.86 percent a year ago. Rates on five-year ARM loans hit a low in records dating to 2005 of 2.69 percent during the week ending Dec. 6.
For one-year Treasury-indexed ARM loans, rates averaged 2.57 percent with an average 0.4 point, up from 2.56 percent last week but down from 2.80 percent a year ago. Rates on one-year ARM loans hit a low in records dating to 2005 of 2.52 percent during the week ending Dec. 20.
A separate survey by the Mortgage Bankers Association showed applications for purchase mortgages during the week ending Dec. 28 falling a seasonally adjusted 14.8 percent compared with levels reported two weeks ago. The results included an adjustment to account for the Christmas holiday.

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While requests to refinance accounted for 82 percent of all mortgage applications during the two weeks ending Dec. 28, demand for refinancings was at its lowest level since April 2012, the MBA said.
In their latest forecast, economists at Fannie Mae said they expect refinancings to drop by 29 percent this year, to $956 billion. Refinancings are expected to account for 53 percent of single-family mortgage originations in the final three months of 2013, down from a projected 76 percent in the fourth quarter of 2012.
Refinancings are expected to drop mainly because most homeowners who are able to take advantage of low rates have already done so. Fannie Mae expects rates on 30-year fixed-rate mortgages to stay low relative to historical levels, rising from 3.3 percent in the first quarter of 2013 to 3.5 percent in the final three months of 2013.
To keep mortgage rates low, the Federal Reserve is buying $40 billion in mortgage-backed securities (MBS) issued by Fannie Mae and Freddie Mac each month. The Fed has said the open-ended program, which also includes $45 billion in monthly purchases of long-term Treasurys, will continue in some form until there is substantial improvement in unemployment.
Fannie Mae economists expect existing-home sales will increase by 9.6 percent this year, and that new-home sales will grow by 19.5 percent if the housing recovery stays on track.

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