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Data & Analysis

Financial Services - June 2010

According to the weekly Primary Mortgage Market Survey conducted by Freddie Mac, 30-year and 15-year fixed mortgage rates hit record lows for the week ending June 25.

  • The rate for 30-year fixed-rate mortgages for the week ending June 25, 2010, averaged 4.69 percent, 6 basis points lower than a week earlier. At this time last year, the rate averaged 5.42 percent. The current rate is the lowest since Freddie Mac began tracking it in April 1971.
  • The rate for 15-year fixed-rate mortgages averaged 4.13 percent, down 7 basis points from the previous week. At this time last year, the rate averaged 4.87 percent. The current rate is the lowest since Freddie Mac began tracking it in August 1991.

In its weekly survey of mortgage bankers, commercial banks, and thrifts for the week ending June 25, the Mortgage Bankers Association found mortgage refinance applications continued to increase.

  • The seasonally adjusted market volume index of mortgage applications, which includes purchases and refinances, increased 8.8 percent for the week ending June 25, 2010.
  • The seasonally adjusted refinance index increased 12.6 percent from the previous week and is at its highest level since May 22, 2009.
  • The refinance share of mortgage activity is currently at 76.8 percent of total application volume.
  • Purchase applications have declined for seven out of the past eight weeks as the seasonally adjusted purchase index hovers near 13-year lows.

The latest Senior Loan Officer Opinion Survey from the Federal Reserve Board of Governors (covering Q1 2010 activity) marked the first time since 2006 that banks reportedly eased standards on C&I loans in two consecutive quarters.

  • Large domestic banks were primarily responsible for easing standards to larger commercial and industrial (C&I) borrowers, trimming pricing terms, including the cost of credit lines and the spreads of loan rates over their cost of funds.
  • None of the smaller banks reported easing their standards on C&I loans to larger firms. Most domestic banks reported little change in standards on C&I loans to smaller firms.
  • According to the survey, the three factors exerting the greatest influence on C&I lending policies were competitive pressures, the economic outlook, and tolerance for risk in the C&I loan market.

C&I loan demand weakened further.

  • Weakening of loan demand was concentrated at smaller domestic banks while large domestic banks reported little net change in demand.
  • Most banks that reported weaker demand cited borrowers' reduced need to finance plant and equipment investment; the large majority indicated that demand for inventory and accounts receivable financing declined.
  • Banks that reported increased demand for C&I loans cited an increased need to finance inventories and accounts receivables and a pickup in mergers and acquisitions.

Most banks reported essentially no change in their standards for prime and nontraditional mortgage loans.

Demand for prime mortgages and home equity loans weakened further.

A significant number of domestic banks continued to report tightening terms on commercial real estate (CRE) loans.

Domestic banks reported weaker demand for CRE loans.

  • The net fraction of banks reporting weaker demand moved below 10 percent for the first time since the recent financial crisis began.


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