- Nov 28, 2005
- Professional Status
- Certified Residential Appraiser
- New York
Has anybody experienced an increase in volume....?
The Federal Reserve's attempt to stabilize the housing market set off a chain reaction across the U.S. on Tuesday, dropping interest rates and quickly spurring a burst of refinancing activity by borrowers eager to lower their mortgage costs.
Some brokers said it was the most activity they've seen in at least one year, although there was no way to determine to volume of refinancing.
At Bank of America Corp., call volume was roughly twice what was expected at call centers and via the Internet, said Matt Vernon, national sales executive. "It's the folks who have been sitting on the sideline. They're jumping in with this news."
Rates on 30-year fixed-rate mortgages dropped by roughly half a percentage point to about 5.5%, for borrowers with good credit scores and substantial equity in their homes, say mortgage brokers and lenders.
While the initial flurry of calls came from people seeking to refinance, economists predicted lower rates also will spur some home buying among bargain-seekers. The surge in refinancing will help the overall economy by putting more cash in consumers' pockets and reducing the pressure on some borrowers struggling to make payments.
"This is a win-win," said Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School. "It will directly increase demand for housing and help with the downward spiral in home prices."
Tuesday's lower rates will for now only benefit borrowers who have the cash and credit rating to qualify for mortgages under current lending standards. The Fed's actions won't make mortgages any easier to get for homeowners or buyers who haven't been able to qualify in recent weeks.
Lower rates also won't help the roughly 11.8 million borrowers who are unable to refinance because they owe more than their home is worth, said Mark Zandi, chief economist of Moody's Economy.com
But he said about half-dozen other interested customers couldn't refinance because they had relatively low credit scores and too little equity in their homes. To get a rate of 5.5% Tuesday, he said, a customer would need a credit score of at least 720, about average, and home equity of 20%.