Higher interest rates changing refinance business

Local mortgage experts are reporting mixed results to their refinance business stemming from the recent increase in interest rates.


“I think the news that interest rates are starting to climb got people to start doing something about it,” said Angela Mitchell, a senior mortgage loan officer for Synovus Mortgage. “It gets a lot of people off the fence.”

Though calls from clients with refinance inquiries at Synovus have slowed down within the past two to three months, Mitchell said it’s because most homeowners looking to refinance had already done so.

“It had already slowed down before the rates increased,” she said.

Josh and Arica Springfield took action in June on refinancing their 1,000-square-foot farm home in Appling as they saw interest rates continue to rise. The couple wanted to take advantage of the rates “before they jumped again,” Josh said.

The Springfields, who are expecting their first child next month, purchased their home four years ago when rates were 5.25 percent. They refinanced at 4.125 percent with First Bank of Georgia.

They are in the process of renovating the two-story house, one room at a time.

“We had done a lot of work to the home, and we had built up some equity,” Josh said.

According to the Mortgage Bankers Association, the average interest rate for a 30-year fixed-rate mortgage remained last week at 4.68 percent, the highest since July 2011.

Additional figures released by the association last week showed that the refinance share of mortgage activity had dipped to 63 percent of total applications, which is the lowest level since April 2011. In May, refinance applications comprised 76 percent of the mortgage market.

Interest rates began climbing from 3.35 percent in May after Federal Reserve Chairman Ben Bernanke spoke of possibly slowing the pace of asset purchases later this year, which led to an overreaction in the market, said Rajeev Dhawan, the director of Georgia State University’s Economic Forecasting Center.

“They were supposed to go up slowly but surely,” Dhawan said of interest rates. “What was supposed to happen in my forecast in the next six to nine months happened in one week.”

By June, the volume of refinance applications had dropped by about 40 percent in a month.

“It puts a fear whenever there’s a change in financing like that,” Mitchell said.

James Gay, a mortgage loan officer for First Bank of Georgia, said refinances only comprise about 5 percent of his business and that larger, regional banks typically handle more refinancing contracts.

“Those are the ones that will see the brunt of these larger rates,” he said.

At Wells Fargo Home Mortgage in Martinez, branch manager Bob Lacey said his office is still seeing a steady number of refinance customers who had figured interest rates would keep dropping and “thought they’d missed the boat,” once the turnaround occurred.

“They’re still at historic rates,” Lacey said. “Six weeks ago, they were just better.”

Lacey, unable to provide numbers for refinance applications and closings at Wells Fargo over the past three months, said the home construction business seems to be affected most by the rising rates.

Bart Chandler, the senior vice president for Georgia Bank & Trust Mortgage, said the climbing rates have “tapered” refinances to some extent but has not totally halted activity.

Because this last cycle of low interest rates was much longer than what’s traditionally occurred in past years, clients had a larger window to act on lower rates, Chandler said.

“Because rates were so low for so long, people had more than ample time to take advantage of the rates,” he said.

Moving forward, rates for a 30-year fixed-rate mortgage are expected to increase for the remainder of 2013 and throughout 2014, topping out at 4.8 percent in the fourth quarter of 2014, according to the Mortgage Bankers Association forecast.

In 2012, the 30-year fixed-rate mortgage averaged at 3.7 percent.

“These fluctuations that are going to happen in the future are going to be mild,” Dhawan said.