Mortgage lenders are seeing a flurry of refinancing activity as mortgage rates drop to the lowest levels in several years.
“The volume has definitely increased with the interest rate movement,” said Mitch Redden, regional sales manager for Wells Fargo Bank.
Redden said mortgage applications at his office during a two-week period , the last week of November and the first week of December , were twice the amount of the entire month of October.
About half the applications were refinancings, and half were for new home purchases, he said, declining to reveal dollar amounts.
At Washington Mutual Bank, which is now owned by JPMorgan Chase, applications following Thanksgiving were triple those received for all of October, according to spokeswoman Sarah Gaugl.
The mortgage rate drop followed news last month that the Federal Reserve Bank would buy up to $600 billion in debt owned by Fannie Mae and Freddie Mac, both now under government conservatorship.
Soon after the decision, national averages on the fixed-rate, 30-year conventional mortgages declined from just above 6 percent to 5.47 percent. Then it fell again to 5.45 percent, according to a Dec. 10 report from the Mortgage Bankers Association.
For borrowers with excellent credit histories, the rate may be as low as 5 percent.
Craig Cole, division manager for Union Bank of California’s residential lending, said the drop of about one point over a several week period is one of the largest he’s witnessed in some three decades in the business.
“That’s the biggest drop that I can remember in a long time,” Cole said. “And the Fed is looking at driving the rate down even further to about 4.5 percent.”
Rising Sales
The drop comes in the wake of one of the worst housing markets in recent history, with the median price of a single-family house in the county plummeting 40 percent.
Home sales rose for a third straight month in October, but nearly half are foreclosed properties, according to Dataquick.
However, Cole said Union Bank wasn’t seeing much of it since the lender specializes in super jumbo mortgages above $729,000, and the average drop for those loans was about 0.5 percent.
Lower mortgage rates were also spurring business at many mortgage brokerages and mortgage banks.
Jeb Spencer, managing partner of TVC Capital, a San Diego private equity firm that owns Del Mar Datatrac, a software products provider to midsized mortgage banks, said the refi activity that many of his clients have seen in recent weeks was the best it has been in the past 18 months.
“We have seen a dramatic uptick in application volume in the last two weeks, maybe three or four times better than what it was for the last six months,” Spencer said. “Once the rates fell below 6 percent on conventional loans, within a few days there was a big increase in volume.”
That boost in business is also prompting some mortgage lenders to bring in new hires, Spencer said.
Yet, the declining mortgage rates aren’t expected to help owners who purchased homes within the past several years with little or no money down.
“Even though the rates have come down, it’s extremely difficult for many people to get financing because of the decline in housing values from last year,” said Ed Smith Jr., a San Diego-based mortgage broker. “You can’t get refinancing when you have no equity in the house.”
