Virginia mortgage rates and industry news

The article below talks about the recent mortgage rate drop in the past few weeks. 

Mortgage Rates Dropping, but Is It Time to Refinance?

RISMEDIA, Jan. 1, 2009-(MCT)-This year’s holiday season is likely to be a little cheerier at Kevin Coughlin’s home. Coughlin refinanced the adjustable-rate mortgage on his Shorewood, Minn., house this month into a 30-year fixed-rate mortgage that’s going to save him $200 a month.

“It takes the pressure off the cash flow,” he said, speculating about how he and his family might benefit from the savings. “Whether it’s groceries or the ability to eat out one more time each month-before, you weren’t going to do it.”

Nationally, mortgage rates fell to an average of 5.19%, the lowest level in 37 years, according to a weekly survey released Dec. 18 by Freddie Mac. Some lenders were reporting even lower rates, and area mortgage lenders say applications are pouring in.

It’s too soon to say what effect the rates will have on the moribund real estate market. The most immediate beneficiaries appear to be homeowners hoping to swap their adjustable-rate mortgages for fixed payments.

“This is nearly a historical and probably unprecedented opportunity,” said Keith Gumbinger of HSH Associates, a financial publisher in New Jersey.

Not everyone will be able to latch on to the lower rates. Homeowners whose property values have fallen may not have enough equity to qualify for the lower rates, and lenders are scrutinizing applications more closely now than during housing’s go-go years earlier this decade.

The decline in mortgage rates comes after aggressive moves by the Federal Reserve aimed at propping up the U.S. housing market. On Dec. 16, the Federal Open Market Committee lowered a key interest rate, and last month the Fed said it would buy $600 billion in mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan banks.

The latest rate decline is unlikely to revive the ailing housing market. According to a survey by the Mortgage Bankers Association earlier this month, refinancings represented almost 77% of all mortgage applications.

Buying a house is a much more complicated process than simply refinancing, and many prospective borrowers aren’t feeling confident enough about the economy to make a big financial commitment, said Ken Johnson, vice president of the Coldwell Banker Burnet office in Minnetonka, Minn.

But a refinance boomlet is also good news for the broader economy. Millions of homeowners still have costly adjustable-rate mortgages. With access to credit tightening, rates on consumer loans rising and the value of equities falling, the opportunity to lock into a fixed-rate mortgage and to reduce payments could relieve pressure on some household budgets.

On a $200,000 mortgage, for example, a shift from 6.25 to 5.25% interest can save more than $100 per month.

“The recasting of debt could mean many billions of dollars let loose in the marketplace to support a very leaky economy,” said Gumbinger, who said recent 30-year, fixed-rate mortgages were the lowest since the 1960s.

Likewise, a flurry of refinancing could help financial institutions that are saddled with risky mortgage debt by getting those loans off their books and freeing cash for other kinds of loans.

Already, loan officers are saying that their phones are ringing off the hook, mostly with people who want to refinance.

“I’m swamped with calls,” said Randi Livon of Residential Mortgage Group in Minnetonka.

Unfortunately, many callers have no equity or owe more than their home is worth. “Their values just aren’t there, and these are people who are working two to three jobs to make their payment,” said Livon.

With the support of the federal government, Gumbinger said, it’s likely that the historic low rates could linger.

“That support is not going away,” said Gumbinger. “The federal government is not like the private market that has to turn tail and run when things get ugly.”

Loan Planet strongly believes that refinancing now can save you hundreds of dollars per month and thousands of dollars over the life of your mortgage.  If you're in an adjustable rate mortgage (ARM) and you have the ability to get out of it and into a fixed rate, NOW IS THE TIME.  Many of our clients have several years left on their ARM before it adjusts, but are moving to a more secure, fixed rate loan. 

We talk to a lot of people who are "waiting" for rates to drop to 4.5% or lower.  Personally, we feel that's a bad idea, as there are no guarantees or indicators that suggest rates will ever get that low, and economic forecasts project that rates may actually start to go up sooner than later.  If you're on the fence about refinancing, let us email you a good faith estimate so you can see your potential savings and determine whether you should refinance now.  At Loan Planet, we have the lowest mortgage rates in Virginia and we are ready to help you fulfill your financial goals!  Contact us today!