Lowest Mortgage Rates Driving Refinances
Some of the lowest mortgage rates in recent times are behind a huge leap in refinancing deals. According to a report published this month by First American CoreLogic, which claims to be the largest provider of real estate, property and ownership data, three million consumers refinanced their mortgage loans in 2009.
Altogether, the refinanced assets were worth $1.4 trillion, which is 77% up on 2008. And mortgage refinance deals remain popular now. According to the latest figures from the Mortgage Bankers Association, more than 69% of all mortgage applications during week ending February 12, 2010 were for refinances.
Refinance and Personal Prosperity
It's not hard to see why so many Americans are scrambling to refinance. The First American CoreLogic report says:
- These refinanced loans in 2009... will result in $3.4 billion of mortgage payment savings in 2010 for U.S. consumers
- Consumers who have refinanced will typically save $108 a month, a 9% reduction from their old mortgage payment
- We estimate that $17.2b in total mortgage payment savings will accrue to U.S. borrowers over the next five years from those who refinanced in 2009
Wow. That's an average of well over a thousand dollars a year each, tax free.
Refinance Is Good for the Economy
The report goes on to point out that this is good news for all Americans. Fewer consumers are using their homes as ATMs (taking cash out when they refinance), and more are simply getting the best mortgage rates on their existing loan amounts.
So the savings they make are real and continuing, which means that the money is going--and will continue to go for years to come--into the general economy. That's a real stimulus.
Refinancing Not Yet for Everyone
But the news isn't all good. Yesterday, the Wall Street Journal ran a story about another report (also, by coincidence, from First American CoreLogic) that described the plight of the 11.3 million consumers (nearly a quarter of all those with mortgage loans) whose homes are worth less than their current mortgage balances.
For many of them, refinancing to take advantage of some of the best mortgage rates for 50 years will remain an impossible dream for some time to come.
Now Is the Time to Refinance
If you are currently lucky enough to be in a position to refinance, then now may well be the best time to act. Last week, the New York Times wrote:
But rarely in recent years have economists from the mortgage and housing industries been so closely aligned in their short-term nationwide forecasts as they seem to be now.
Economists are generally predicting that mortgage rates will begin to edge up in late March, settling at about 5.5 percent, possibly as high as 6 percent, for a 30-year fixed-rate loan. The rate today is around 5 percent.
So compare current mortgage rates now.