Mortgage rates drop to record low

Mortgage rates dropped this week to their lowest level in the history of Bankrate's survey.

The benchmark 30-year, fixed-rate mortgage fell 6 basis points, to 5.13 percent, according to the Bankrate.com's national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.46 discount and origination points. One year ago, the 30-year fixed was 6.12 percent; four weeks ago, it was 5.41 percent.

The benchmark 15-year, fixed-rate mortgage fell 7 basis points, to 4.73 percent. The benchmark 5/1 adjustable-rate mortgage rose 2 basis points, to 5.23 percent.

Mortgage application activity ticked up just slightly for the week ending March 27, rising by a seasonally adjusted 3 percent compared with one week earlier, according to the Mortgage Bankers Association.

Refinancing was up 3.7 percent while applications for new purchase rose by 0.1 percent.

This week's readings show that activity remains strong one week after the MBA reported an increase of more than 32 percent in applications. Still, the MBA now forecasts 2009 mortgage originations to top $2.78 trillion this year.

That would make this year the fourth highest for originations, behind only 2002, 2003 and 2005, according to the MBA.

Mortgage activity jumps

"When the media indicates that mortgage rates are in the 4s, it's a floodgate and the phones just ring incessantly," Moulton says. "We've been very, very busy. I haven't seen this type of volume probably in about five years."

Steven Levitt, vice president of mortgage lending at Guaranteed Rate in Chicago, also says mortgage activity is "absolutely increasing."

"I think we're actually experiencing the perfect storm right now," he says.

Sue Woodard, a home loan originator for Lakeland Mortgage in Minneapolis, says, "Call volume is certainly very high."

Chris Sipe, senior mortgage consultant at Mason Dixon Funding in Frederick, Md., says his office has been "swamped for months."

Activity has increased so significantly that some lenders are struggling to meet demand.

"The last two years have been pretty quiet, so (banks) laid people off," Moulton says. "Now, they have all this new volume and they don't have the staff to accommodate it."

Refi mania

Dick Lepre says that "all the pickup is refi" at RPM Mortgage in San Francisco, where he is senior loan officer. Meanwhile, Sipe says "refinance activity has been overwhelming."

However, many lenders also report an increase in new purchase applications.

"We're seeing a huge push right now on purchase transactions," says Levitt, who attributes the upswing to a combination of low rates and the arrival of the spring selling season.

Jim Sahnger, a mortgage consultant with Palm Beach Financial Network in Stuart, Fla., says his office is handling more new purchases, a trend he expects will continue.

"I see mortgage activity increasing for the next three to six months as more first-time homebuyers enter the mix," he says.

Sipe says applications for new purchase also are up in Maryland over the past couple of weeks. But his optimism is measured.

"The gestation period of a buyer in this market is similar to that of an African elephant: very, very long," he says. "There is a stockpile of buyers, but many are looking for something to pull the trigger."

For these nervous buyers, rock-bottom prices -- not low rates or government stimulus -- remain the ultimate sales catalyst, according to Brian Peart, president of Nexus Financial Group in Atlanta.

"It seems more foreclosure and deal-driven than rate-driven," he says. "The homes that seem to be moving on the market are the foreclosed ones. Buyers are only interested in deals."

Tax credit bust?

Moulton says "nobody's really talking about it," and Sipe characterizes the tepid response to the tax credit as "disheartening."

Peart also believes the tax credit is flying under home shoppers' radar right now. "A lot of borrowers don't seem to know about it," he says.

Levitt says the tax credit may be a victim of unrealistic expectations. "People are not going to just buy a home because of a tax credit," he says. "It's actually just an added bonus."

However, not everybody is ready to give up on the incentive. Sahnger says his office is seeing "some impact" from the tax credit. Peart hopes educating consumers about the credit eventually will drive home sales higher.

"I teach guys to sell that hard," Peart says. "Those that are, they are seeing a pickup."