Refinancing Is On The Rise
Jan 26th, 2008 @ 3:52 PM by Alden Smith
According to Reuters, the Fed cut has had some effect on the mortgage market. The cut has made refi much more enticing, and with interest rates steadily dropping, it makes about $1 trillion dollars in current loans looking much better for refi.
The fears of a recession are really drubbing the market, with a benchmark 10 year Treasury note yielding as little as 3.30%. This is down from 3.70% a week ago. Relying on Bears and Stearns data, this action has made the number of mortgages that can be refinanced increase by at least 50% equal to $3 trillion.
Homeowners who pay 6% today on a $250,000 home can save at least $1,220 annually if they refinance to today’s interest rate of 5 3/8. This would make refinancing a good choice at this time. Figures on interest rates are quoted from Refinance.com. Data reveals that currently, most fixed mortgages run from 6 to 6.5%. Refinancing makes sense here.
This is good news if you own a home and have kept up to date on your mortgage payments, yet face a big reset coming up soon. Not so good, though, for sub prime borrowers, because banks will certainly be a lot more concerned about who they lend money to. However, they may look at things a bit differently since the Fed and the government is doing all they can to stop the bleeding in the economy. We will have to wait and see.
The Mortgage Bankers Association recently reported that refis have been on the rise, jumping 92% since last November. This data is of course skewed, because people seeking a refi will apply to more than one banker to get the job done. And the data is taken from the number of new applications processed, whether the loan was approved or not. The current mortgage market, standing at $10 trillion, is still burdened with loans that will not qualify.
Possibly there is a bit of light at the end of the tunnel. We have been through crisis before, and are facing it again. How it sorts itself out will be interesting to see.
You say, “This is good news if you own a home and have kept up to date on your mortgage payments, yet face a big reset coming up soon.”
How is this good news for the people that have a been keeping up with their mortgage payments, have a big reset coming up, but because of the downturn in the housing market – do not have the equity in their home to qualify to refinance their loans?
I would imagine their is a huge percentage of people in this situation.
Thank you for the comment, Chantal. You, as a real estate agent, know that homes have been highly over valued. I think the recent events show that homes are now being valued at a more reasonable dollar amount. If people can afford these luxury homes, they certainly can keep up with the payments, unless they are living way beyond their means. In my opinion, this is partly what this shakeup is all about.
A~