by Calculated Risk on 12/18/2014 07:46:00 PM

Friday:
• At 10:00 AM ET, Regional and State Employment and Unemployment (Monthly) for November 2014

• At 11:00 AM, the Kansas City Fed manufacturing survey for December.

From Freddie Mac: Mortgage Rates Find New Lows for 2014

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates falling to new lows for this year as 10-year Treasury yields closed at their lowest level since May 2013.

30-year fixed-rate mortgage (FRM) averaged 3.80 percent with an average 0.6 point for the week ending December 18, 2014, down from last week when it averaged 3.93 percent. A year ago at this time, the 30-year FRM averaged 4.47 percent.

Click on graph for larger image.

This graph shows the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey® compared to the MBA refinance index. 

Historically refinance activity picks up significantly when mortgage rates fall about 50 bps from a recent level.

Many borrowers who took out mortgages over the last 18 months can refinance now - but that is a small number of total borrowers.  However, for a significant increase in refinance activity, rates would have to fall below the late 2012 lows (on a monthly basis, 30 year mortgage rates were at 3.35% in the PMMS in November and December 2012.

Based on the relationship between the 30 year mortgage rate and 10-year Treasury yields, the 10-year Treasury yield would probably have to decline to 1.5% or lower for a significant refinance boom (in the near future). With the 10-year yield currently at 2.20%, I don't expect a significant increase in refinance activity any time soon.