Continue Falling Mortgage Rates Fuel trade action

Mortgage interest rates rolled back to 2013 levels this week on unsatisfactory home and economic activity.The thirty-year fixed-rate mortgage averaged 3.59% this week, down from 3.66% last week. One year ago this time, it was as high as 4.32%, according to the Freddie Mac Primary Mortgage Market Survey.

Mortgage rates fell this week follow the release of weaker-than-expected pending home sales said deputy chief economist at Freddie Mac.

Pending Home Sales fell 3.7% in December, according to the National Association of Realtors. The Pending Homes Sales Index tallies contract signings. It’s a strong indicator of where the market is headed, since a home is listed as pending only after all contingencies have been met and the deal is simply waiting to close.

Smaller amount homes available for sale and a slight acceleration in prices likely led to December decline, said chief economist at NAR. With interest rates at lows not seen since early on 2013, the strength in existing sales in upcoming months will largely depend on the willingness of present homeowners to realize their equity gains from the past couple of years and trade up.Demand is improving

Mortgage applications for FHA loans spiked last week in the midst of lower FHA mortgage insurance premiums, according to the MBA. Both purchase and refinance activity are up, signaling higher demand for housing.

Increase consumer confidence, and new low-down-payment programs upcoming into the market will likely lead to more demand from first-time buyers.

Buyers are refinancing, and they are choosing FHA loans to do so. Refinance application using FHA loans increased 76.5% after the drop in mortgage insurance premiums. FHA buy applications increased 12.4%, according to the MBA.Rates are responding

The 15-year fixed-rate mortgage fell to 2.92% this week from 2.98% last week, according to Freddie Mac. It was 3.4% one year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.82% this week, down slightly from 2.86% last week. One year ago this time, it was 3.12%.

The one year Treasury-indexed ARM averaged 2.39% this week, up from 2.38% last week. It is still lower than last year at this time, when it averaged 2.55%.