The residential mortgage market is experiencing an unexpected – but welcome — boom, a result of interest rates for 30-year fixed-rate loans falling to 5.47 percent from 5.99 percent.  According to the Mortgage Bankers Association’s (MBA) weekly review, the average rate for a 15-year fixed-rate loan – popular when refinancing – fell to 5.13 percent from 5.78 percent.  A one-year adjustable-rate mortgage decreased to 6.61 percent from 6.87 percent. The existing-mortgage refinance rate tripled during Thanksgiving week, while purchase volume increased 38 percent.  Refinance applications were 69.1 percent of the total volume, a significant increase over the 49.3 percent reported during the previous week.  The survey covers approximately 50 percent of all weekly residential mortgage originations.

The MBA reported that the application rate more than doubled during the short Thanksgiving week.  The trade group’s application rate rose to 857.7 in the week ending November 28, compared with 404.4 the previous week.

Clearly, part of the demand is being driven by buyers locked into floating-rate or short-term debt or adjustable-rate mortgages looking to refinance into fixed-interest vehicles.  While Frannie and Freddie should fill some of the void in light of their $20 billion bailout, the market will still have a financing shortfall with the disappearance of CDOs and the securities market.