The Akron Legal News

Another drop in mortgage rates results in refinancing ‘mini-boom’

ELISSA COLLOPY
Special to the Legal News
Published: May 3, 2016

A mini-refinance boom has begun as homeowners take advantage of today’s still-low mortgage rates.

Low mortgage rates mean lower monthly payments and with home values rising and mortgage rates nearing the lowest they’ve been in years, the opportunity to refinance or achieve a financial goal is possible for many.

“People refinance for a number of reasons including a way to lower their overall monthly mortgage payment so they have more residual income each month,” said Natalie Moore, a member of the board of Ohio Mortgage Bankers Association and loan officer at Home Savings. “Also as a way to pull cash out of their residence so they can do a number of things such as renovations on their house, funding college for their children, purchasing vehicles and even paying down high-interest credit cards.”

U.S. Treasury prices jumped in March, making it possible that borrowing costs on home loans could fall.

Record lows occurred in 2012-13, where 30-year fixed rates fell to 3.31 percent according to Freddie Mac.

Due to this recent drop, many lenders call this year a “mini boom” because a lot of homeowners already refinanced three years ago.

Moore says this drop in rates has a positive effect on the lending industry because as consumers hear that information, they look at their options on whether they can save money by refinancing.

“However, there are many homeowners and buyers out there that aren’t aware of how low rates really are,” she said.

Mortgage rates were around 3.68 percent in March, and the current 30-year fixed mortgage rate in Ohio is at 3.49 percent, making refinancing possible for millions of borrowers according to Freddie Mac.

A report from data company Black Knight said these low rates would bring the total number of eligible loans to about 8.8 million, or 20 percent of loans, the highest amount eligible for refinance since 2012.

“Mortgage rates are so low that even with securing a long-term rate lock to make sure you have enough time to close your loan, you are still at a very low interest rate — better than last year this time,” said Moore.

However, mortgage rates are unstable, so it varies day to day, or even several times a day.

“Although they do fluctuate on a daily basis, they are still very near record lows,” said Moore. “I would anticipate slight increases throughout the year, but on average I would forecast rates to remain fairly close to where they are now. Not that it’s always this way, but election years trend to be years where rates remain lower.”

Homeowners two to five years ago had it much easier in terms of the ability to refinance a home.

According to Bankrate, many homeowners got away with exaggerating their incomes, terrible credit histories, or giving little to no down payment.

A candidate for refinancing currently must retain good credit, must have equity in the home, earnings to cover the repayment of the loan, and enough cash to pay the closing costs.

Those tighter guidelines have prevented a substantial amount of people from refinancing, even if they wanted to.

Even with those stipulations, the Mortgage Bankers Association has increased its projections for refinancing.

In the middle of December, it expected $415 billion of loans to be refinanced this year, but in mid-February its forecast was 25 percent higher at $520 billion.

To Moore, the lowering of mortgage rates is not surprising.

“I’ve been hearing for the past five-plus years that rates are lower than ever and they’re only going up, yet each time I’ve followed that same forecast, I’ve seen slight increases only to be followed by rates coming back down,” she said.

The real economic factors that cause fluctuation are highly subjective and include disparate economic reports on stock and bond behavior in the stock market, the amount of buyers to sellers that affects the movement of money in and out of the stock market, unemployment percentages, inflation fears, as well as economic data that reflect the strength of the economy according to Ohio MBA.

“Mortgage rates are what I call both market and consumer driven,” said Moore. “Consumers pulling money out and putting money in to the (bond) market will have a direct impact on long-term fixed rate mortgages. It’s also driven by forces outside the U.S. — global uncertainty is definitely a factor in what can drive mortgage rates up or down.”

As far as looks to the future, Moore said it’s uncertain.

“A more accurate depiction of what will happen to rates — nobody can be sure,” she said.

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