Mortgage rates once again plunged to the lowest levels in decades, but there was no surge in refinance applications.
The benchmark 30-year fixed-rate mortgage fell 9 basis points this week, to 4.57 percent, according to the Bankrate.com 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 0.48 discount and origination points. One year ago, the mortgage index was 5.67 percent; four weeks ago, it was 4.77 percent.
Mortgage rates haven't been this low in about 55 years. Rates on FHA-insured mortgages averaged 4.56 percent in February 1955, according to the National Bureau of Economic Research. Conventional mortgage rates probably were similar.
The benchmark 15-year fixed-rate mortgage fell 5 basis points, to 4.06 percent. The benchmark 5/1 adjustable-rate mortgage fell 3 basis points, to 3.92 percent, and the benchmark 30-year fixed-rate jumbo fell 7 basis points, to 5.27 percent. All were records in the history of the Bankrate weekly survey.
Weekly national mortgage survey
Results of Bankrate.com's Aug. 11, 2010, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
Low rates, even lower enthusiasmWith rates so low they could crawl under a snake's belly, you might expect homeowners to be refinancing in droves. But mortgage applications were flat last week, according to the Mortgage Bankers Association. About 78 percent of applications were from homeowners wishing to refinance.
"I think you have a combination of people who have self-selected," says Christopher Cruise, a longtime loan officer who now trains brokers for LoanOfficerSchool.com. "They believe that they can't refinance. They've been hearing these stories that even people with high credit scores and great employment and great equity are not being able to refinance."
So they don't call and, Cruise says sardonically, "we don't get the chance to say no to a lot of people."
The office of Freddie Mac's chief economist, Frank Nothaft, issued a note this week titled "Where Have All the Originations Gone?" It gave a number of answers:
- One-quarter of homebuyers are paying cash.
- Falling home values prevent or dissuade homeowners from refinancing.
- Home-equity lenders block refinances by refusing to agree to remain in the second lien position.
- Few people are buying homes anyway.
Get out of Dodge!Industry analyst Paul Descloux, publisher of the Mortgage Maxx application index, acknowledges that there are a lot of people who want to refi but can't. As he phrases it: "The tail of those wanting to change their mortgage situation remains fat indeed." Descloux has a suggestion for improving the lot of some homeowners who can't refi: Change the rules that restrict withdrawals from 401(k)s.
"But for those able, for a specified time allow those with retirement plans to withdraw without penalty some funds to pay down their mortgage," Descloux writes in this week's newsletter. He explains that encouraging people to reduce their 6 or 7 percent mortgage debt "is a quantifiable winner" if their alternative is investing in low-rate CDs or low-yield bonds.
On the other hand, maybe some people are merely waiting for the employment picture to improve so they can move. That's what Cruise wonders about. Americans are mobile, and a lot of people have been living in their homes five or six or seven years and are itching to move, he says.
"Rather than thinking about refinancing, I think we're thinking about moving," Cruise says. "We don't want to refinance. We want to get the hell out of here and go somewhere else."