|
Pinnacle e-Letter Falling Mortgage Rates Boost Refinancing Mortgage rates around the country fell earlier this month, with rates on 30-year mortgages dipping to the second-lowest level of the year. If you are among the large pool of homeowners who have adjustable rate mortgages or interest only loans, now might be a good time to think about refinancing. Mortgage giant Freddie Mac reports that mortgage rates are now averaging 6.11%, the lowest since January when rates dipped to 6.10%. The average rate six months ago was 6.67%. The average 30-year fixed loan rate for this year is 6.44%. A year ago, 30-year rates averaged 6.32 percent. Top Wall Street economist James Glassman of JPMorgan Chase expects 30-year fixed mortgage rates may soon dip as low as 5.75 percent, especially if crude oil prices drop and the rate of inflation as measured by the Consumer Price Index remains low. The unexpected and steady decrease in fixed mortgage rates is driving a surge of refinance activity nationwide. Mortgage brokers are already seeing an increase in the number of homeowners who are refinancing adjustable-rate mortgages or consolidating mortgages and floating-rate home equity credit lines into one fixed-rate loan. A recent survey from the Mortgage Bankers Association (MBA) reports that refinancing activity is at its highest level since April 2004. Roughly half of total mortgage applicants in the first week of December were seeking to refinance an existing mortgage. Lower rates are particularly attractive to the millions of homeowners whose adjustable-rate mortgages are resetting to higher rates. Freddie Mac chief economist Amy Crews Cutts says about $500 billion worth of interest-only and payment-option home loans will reset upward in 2006. More than $600 billion will reset next year. The monthly payments after a reset on an interest-only or payment-option loan is frequently 100 percent or more compared with the original low rate. This alone is incentive to refinance while 30-year fixed rates remain low. Fifteen-year fixed rates also continue to show declines. The average for 15-year, fixed-rate mortgages was 5.84 percent the first week in December. A year ago, 15-year rates averaged 5.87 percent. Buyers, especially first-time buyers, also have a window of opportunity with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates. As the example below indicates, a minimal interest rate reduction can add up to significant saving over a 15- or 30-year period. How 30-year fixed-rate mortgages with a ½ point upfront fee and 20% down compare:
Return to the December 2006 e-Letter
|
Comments? Please contact us.
