Still a great time to refinanceby Tim Manni
Record-low mortgage rates have been about the only stable slice of the economy we’ve seen for some time now. While stringent credit conditions have prevented many homebuyers from cashing in on cheap financing, the sheer persistence of these low rates has given refinance borrowers ample time to take advantage of them.
Every drop in rates opens up at least some refinance opportunity to a new group of borrowers to either get a lower rate, a different term or loan product, and ultimately, a lower monthly payment or a quicker payoff:
Refinancing applications continue to strengthen as interest rates decline. To create and sustain a refinance wave, interest rates must not only fall, but remain there long enough to allow even casual observers of mortgage rates to take notice and ultimate action. Sharp or fleeting dips in rates frequently don’t leave enough time for borrowers to get a transaction put together, making the duration of the dip in rates a crucial element in the formation of the trend.
After stumbling around in a narrow range since early July, applications to refinance mortgages staged a bit of a breakout last week, with the Mortgage Bankers Association of America report noting a 17% jump during the week of August 13. All indications are that there has been some additional activity this week, too, as interest rates continue their decline.
Rates are holding at great levels:
Every week in its 30-year history, HSH has produced an overall mortgage monitor — our Fixed-Rate Mortgage Indicator (FRMI) and we continue to run at record lows. The FRMI includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public. HSH’s FRMI rose by a single basis point (.01%) to 4.80% to close HSH’s weekly national survey. Believe it or not, cheaper alternatives to a fixed-rate mortgage can be found in the form of a Hybrid 5/1 ARM, which rang in at an average rate of 3.77% [last] week.
What can we expect this week?
A little additional easing may occur this week. However, if the Friday GDP report is weak, mortgage rates may find some new space to fall. As we mentioned before, we have seen patterns change as we get into September, so any additional decline in rates might not last that long:
Rates were steady this week, but given the behavior of other influential yields we think they have a little room to fall even before next week’s data come out. Lenders are starting to get a little busy, so if you’re jumping into a refinance, you may need to have a little patience.
CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Economic Stumbling and Easier Mortgage Credit.”
HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.