Record low mortgage rates spur refinancing

Chris Hudson cut thousands of dollars off the cost of the mortgage on his Evans home.

• Photos

Jackie Ricciardi/Staff

Lori Williams, a vice president of Regions Mortgage, said refinancing applications have increased 80 percent at her office in recent days.

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When he bought his home in northern Columbia County in 2005, he locked in at a 6 percent interest rate. He just refinanced down to 4.75 percent.

A year ago, the average interest rate nationally for a 30-year mortgage was 5.34 percent, according to the Mortgage Bankers Association; 4.83 percent for 15 years.

"I did it to save on what I'm paying back on the overall loan (after 30 years). The monthly payment was not the biggest consideration," said Hudson, an Augusta attorney who handles loan closings.

Hudson says he'll likely stay in his home for at least the next five years, though the payback on what he's saving versus the up-front costs for refinancing will be seen far sooner.

Record low interest rates are drawing customers like Hudson to local banks and mortgage companies to refinance their mortgages. Now that the federal home buyer tax credits have waned, more business is coming from refinanced mortgages rather than purchase mortgages.

"The last few weeks has been straight refi. Had a bunch of purchase stuff last month. This month is pretty much all refinance business," said Sean Collett, of Rhodes Financial Services.

Lori Williams, a vice president of Regions Mortgage in Augusta, said her refinance applications increased 80 percent over the last few days.

"I'm locking people in at 3.75," she said. "It took awhile for it to get out there. Everybody was so into the first-time home buyer credit that it was a priority for April, May and June. And now people are awakened to interest rates."

Nationally, the refinance share of mortgage activity was 78 percent of all mortgage applications last week, according to the latest weekly survey from the MBA.

That is the highest refinance level seen in the survey since April 2009.

According to BankRate, the local average for a 30-year fixed mortgage is 4.5 percent; 3.97 percent for a 15-year fixed mortgage. The national average is 4.74 percent for a 30-year and 4.22 percent for a 15-year.

"Mortgage rates remained near record lows ... As more homeowners locked in to these low rates, the level of refinance applications increased to a new 13-month high," said Michael Fratantoni, the MBA's vice president of research and economics.

Are businesses busier with refinance applications? Yes. Overwhelmed? No.

"With these rates they way they are, I should be swamped. I'm busy, but I should be working 16 hours a day with the rates the way they are," said Ed Leonardi, a Southern Bank & Trust mortgage officer in Aiken.

IN OTHER SMALL SHOPS, such as The Mortgage Place in west Augusta, loan officers are satisfied with the level of clients seeking refinancing.

"We could be busier, but we're happy. We had a good influx in the last month," said Renee Lemons.

Banks with a regional draw, such as Regions Bank, report more business. Williams said the bank's operations center in Florida is on mandatory overtime to get through the paperwork for refinancing.

In one week in June, Regions received 118 mortgage applications in the Georgia-South Carolina area. There were 222 applications last week, Williams said.

Larry Moss, the president of Augusta Mortgage Co., a division of Blanchard & Calhoun, says there's another refinancing surge, but it is nothing like it was in the beginning of 2009.

"A lot of people have already done the refinance. And they did them at rates that would not warrant doing them again at current rates," Moss explained. "Those that didn't do it then are doing it now, but it is not creating an overwhelming supply of applications."

So, who are the homeowners remaining who haven't refinanced until now?

They sat around and thought about it too long last year and now they're coming around, Collett said.

"The rates can go up half a percent and it isn't worth it for some people," he explained. When they come back down, like what is happening now, then it becomes economically viable.

There's no one reason driving the surge to refinance.

For Hudson, refinancing dropped the amount of interest he would be paying over the course of the next few decades.

The monthly payment was not the main consideration, he said.

Others finance in order to lower the monthly payment, Collett said, and improve their monthly cash flow.

Lemons is seeing people get rid of their old equity lines of credit -- erasing the legacy of the home equity line of credit craze of the early 2000s -- by consolidating the mortgage and home equity line of credit in one new loan.

Homeowners are taking mortgages with 20 years left and pushing them back to 30-year mortgages, taking the cash from the transaction in order to pay for college, Moss said. But it is more common for homeowners to reduce their payments and the number of years left on the mortgages.

"I worked up one where the customer was going from 25 years to 15, paying off a second mortgage ... and their payment is not going up," Williams said.

She thinks the rates will stay at their current levels for the foreseeable future, sharing the view of other area mortgage officers.

"I do not see it going any lower. I don't think there is any call for a 3.5 percent bond," Williams said.