Mortgage rates plummet after Fed action

"Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period when the GSEs were placed under conservatorship," said Orawin Velz, associate vice president of economic forecasting for the association. GSEs refer to government-sponsored enterprises Freddie Mac and Fannie Mae.

"When rates plummeted following the Fed's announcement that it would buy GSE debt and MBS [mortgage-backed securities], many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound."

The Federal Reserve announced last week that it would purchase up to $100 billion in direct debt of Fannie, Freddie and the Federal Home Loan Banks, along with up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae.

The move caused mortgage rates to drop.

According to the MBA survey, rates on 30-year fixed-rate mortgages averaged 5.47% for the week ending Nov. 28, a shortened week due to the Thanksgiving holiday. The mortgage averaged 5.99% the previous week.

Fifteen-year fixed-rate mortgages averaged 5.13% last week, down from 5.78%. And one-year ARMs averaged 6.61% last week, down from 6.87%.

Applications to refinance an existing loan rose 203.3% last week, compared with the week before. Mortgage applications to purchase a home rose a seasonally adjusted 38.0%.

The four-week moving average for all loans was up 29.7%. Still, application volume last week was down 21.9% compared with the same week in 2007.

Refinance applications made up 69.1% of all activity, up from a 49.3% share the previous week. The adjustable-rate mortgage share was 1.4%, down from 3.0% the week before.