The Fed have slashed interest rates in the past month to spur home sales. But instead, the cuts sparked a refinance boom that local lenders hope will re-energize consumer spending.
The home mortgage refinance application index tracked by the national Mortgage Bankers Association tripled during the last week of November, the largest increase since the group began tracking in 1990.
The surge has continued for the past three weeks, with some Middle Tennessee lenders reporting up to 80 percent increases in refinancing applications since rates dropped after Thanksgiving.
Last week, the number of refinance applications increased 98.5 percent over the same week last year, according to numbers released Wednesday.
Mortgage expert Steve Curnutte says it’s finally a chance for homeowners who used good financial judgment to see a benefit from the many tools the government has used to boost the economy.
“It’s finally helping high-credit borrowers,” says Curnutte, head of Nashville’s Finworth Mortgage LLC, division of Ins Bank. “It’s a small consolation prize, but it’s helpful.”
Interest rates have fallen to just above 5 percent for a 30-year fixed mortgage, and experts say they could drop further.
Gayle Kindig, vice president of mortgage banking for Regions Bank in Middle Tennessee, says someone who bought a home as recently as 90 days ago could refinance today and possibly lower their rate by 1 percent.
Bankers are urging consumers to snap up the low rates and not play the wait-and-see game.
“Rates can change by the hour,” says Kindig, adding that refinances are 70 percent of her bank’s loans this month, compared to 45 percent in November.
Brian Sellers Pitts, of Sellers Financial Group Inc. in Nashville, says his refinance applications increased 80 percent this month from the previous month, but he’s not sure how many consumers will complete the loan process.
“There is still a lot of apprehension, a lot of fear in the market,” he says. “A lot of people want it. People want to wait until it goes lower.”
Ross Kinney, senior vice president of mortgage advisory for Pinnacle Financial Partners, says refinances are 71 percent of all mortgage loans for the month, compared to an average of 47 percent for the year.
The refinance surge hasn’t spilled over into new home sales. Kindig, however, is optimistic that with so much inventory on the market and the low interest rates, home sales will begin to pick up.
Josh Malnofski, president of Malcap Mortgage, says low interest rates are not the only factor driving refinancing. Of the more than 66,000 subprime adjustable rate mortgages in Tennessee, nearly 1 in 4 are expected to reset within the next 12 months, according to the Federal Reserve Bank of New York.
Malnofski says his refinancing applications are up 30 percent this month, and with the average person saving $100 to $200 per month on their mortgage — money that could help Nashville’s economy.
“It will stimulate retail,” Malnofski says. “Typically people are not going to put that money in a savings account.”
No comments:
Post a Comment