Local mortgage professionals are seeing a surge of applications for refinancings as interest rates on home loans hit record lows.
Freddie Mac said the average rate for a 30-year fixed-rate mortgage was 4.96 percent, with average points of 0.7, for the week that ended Thursday, the lowest level since its survey began in 1971. It was 5.01 percent last week and 5.69 percent a year ago.
“The refinancing volume coming in is almost beyond our capacity,” said mortgage banker Lou Barnes of Boulder West Financial Services in Lafayette. “In normal times we close 30 to 40 loans a month. In November we closed 10. In December we were over 50. This month will be more than that.”
Still, that’s well below the 90 loans a month Barnes closed in 2003, when rates were almost as low and lending standards were loose. Now, tight credit markets mean borrowers with blemished credit records or homes that have declined too much in value are finding it difficult to get approved.
Rates are falling because the Federal Reserve began buying Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities this month. The Fed has purchased $23.4 billion of the mortgage bonds as part of $500 billion plan being implemented through June.
Most of the increase in mortgage applications being seen by local lenders is coming from homeowners wanting to refinance rather than from prospective homebuyers.
The Mortgage Bankers Association reported Wednesday that its weekly index measuring refinancing application volume was at its highest level since June 2003.
The local sales market is struggling, though it showed signs of improvement at the end of the year. In metropolitan Denver, home sales were down 3.9 percent last year and median single-family home prices were off 10.9 percent year-over-year in December, according to Metrolist data.
Rising unemployment and a deep recession are deterring many people from buying homes, but refinancings at current rates are attractive because homeowners can save money.
“With these low rates and people being in the high 5’s or 6 range (interest rates on their current loans), it can definitely make sense to work with a professional,” said Rod Cameron of Cameron Financial Services in Golden. “Anyone that’s thinking of it should at least look at it to see if it makes sense.”
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
