Low mortgage rates fail to increase refinances
Mortgage refinancing applications decreased last week in spite of continuing low mortgage rates. While the possibility of refinancing to a lower interest rate is enticing to many homeowners, those who have yet to refinance in 2011 are likely unable to qualify due to declining home values and a weak economy that has reduced incomes and credit.
The Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey for the week ending December 16, 2011 showed a decrease of 1.6 percent for refinance applications over the previous week. Overall, mortgage applications declined by 2.6 percent.
“Continued anxiety surrounding the fragile economic situation in Europe led interest rates lower last week. However, refinance applications fell slightly, and purchase applications dropped further as we head into the end of the year,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Remarkably low rates are not enough, as many homeowners continue to hold back due to lack of equity in their properties, poor credit and a weak job market.”
The refinance share of all mortgage applications increased to a high for the year at 80.7 percent. Those who apply for a home refinance are overwhelmingly choosing a fixed-rate home loan, with just 5.1 percent of applicants choosing an adjustable rate mortgage (ARM).
Mortgage refinance rates
According to HSH, the average rate for a 30-year fixed-rate home loan was 4.25 percent last week, while a 15-year fixed-rate home loan averaged 3.54 percent. The average rate for a 5/1 ARM was 3.06 percent.
Many homeowners who have not refinanced recently have a home loan with a rate above five percent and could save significantly if they qualify for a new mortgage. For example, a $250,000 30-year fixed-rate home loan costs $1459 per month at 5.75 percent. The payments on that loan would drop to $1230 if refinanced at 4.25 percent.
Consult with a mortgage lender even if you are uncertain about your home value or your ability to qualify for a new home loan, since programs are available to approve mortgages even for borrowers with low equity or less-than-perfect credit.
