By sbup Staff
Homeowners rushed to refinance their mortgages last week, according to data from the Mortgage Bankers Association. But last week’s 64% increase in refinance activity came on the heels of a 30% decline just the week before. What's behind this refinancing rollercoaster?
Quite simply, consumers are trying to time the mortgage market. Potential refinancers looking to take advantage of the lowest rates in decades are sitting on the fence, waiting for rock bottom. "It used to be that 6% was a great rate," says Orawin Velz, associate vice president for economic forecasting at Mortgage Bankers Association. "Now they are spoiled and waiting for when rates hit 5% or lower."
Many believe that the flaw with this approach is that it's extremely difficult to time mortgage rates, even under normal conditions -- and these are far from normal times. Mortgage rates are at their lowest levels in decades thanks to a variety of factors, including government intervention and concern about the state of the economy. But rates remain volatile due to unease over growing government debt and, according to Velz, lenders who quote higher rates help control a rush in demand.
The drop in demand from the previous week helped lower rates enough to pull many refinancers off the fence. But renewed demand for mortgages -- applications were up 46% from the previous week, according to the Mortgage Bankers Association -- along with rising concerns over the impact of increasing government debt could just as easily send rates higher.
If you're a candidate for refinancing, i.e you have good credit and your home is still worth more than your mortgage , then you might consider hoping off the fence and checking out what interest rates are available in your area. Use sbup’s mortgage section to explore rates and offers in your area.
Mortgage lending from banks that received bailout money, such as Citibank (Stock Quote: C), Bank of America (Stock Quote: BAC) and Wells Fargo (Stock Quote: WFC), increased in December. The U.S. Treasury's new monthly lending survey attributes this rise to falling interest rates fell and increasing application activity.
But rates and activity can change, and you don't want to get stuck on the fence. "People are very sensitive to what's going on with mortgage rates," says Velz. "But there's a lot of volatility."
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