John Stearns, a broker at American Fidelity Mortgage in Mequon,Ralph Lauren, Wisc. is chasing borrowers himself. But he’s finding out that many of them have already missed mortgage payments, have shaky credit or lost their jobs. So they don’t qualify for a new loan. Others simply don’t have enough equity in their homes.
And it’s not just 30-year fixed loans. The rate on the 15-year fixed loan, a popular choice for refinancing, dropped to 4.03 percent from 4.06 percent last week. That was the lowest on records dating back to 1991.
To be sure, the number of borrowers filling out applications each week is still about 40 percent lower than at the start of 2009. Rates were around 5 percent then.
And ultra-low rates have not convinced many people to buy homes. The National Association of Realtors said Thursday that June sales of previously owned homes fell 5.1 percent from the previous month.
NEW YORK – The lowest mortgage rates in decades are just too good for some people to pass up.
About a quarter of refinancing activity is coming from homeowners seeking 15-year loans, said Jay Brinkmann, the Mortgage Bankers Association’s top economist. Many homeowers have made the calculation that paying off mortgage debt early is a wiser financial move than investing in savings accounts with minuscule interest rates or risking their money on the volatile stock market.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year, 15-year and 1-year loans. The average fee for 5-year loans was 0.6 of a point.
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AP Real Estate Writer Alan Zibel contributed to this report from Washington.
“A lot of people don’t qualify and they know they don’t qualify,” Stearns said.
Refinancing a home loan often requires the homeowner to pay thousands of dollars in closing costs. Many people either don’t have the money, or they can’t qualify for a loan. And rates have been low for such a long time that many people may have already refinanced. It is not in their interest to do so again to save a little bit more on monthly payments.
Rates on five-year adjustable-rate mortgages averaged 3.79 percent, down from 3.85 percent a week earlier. Rates on one-year adjustable-rate mortgages fell to an average of 3.70 percent from 3.74 percent.
Still, the last time home loan rates were lower was during the 1950s, when most mortgages lasted just 20 or 25 years.
“We’re not getting the phone calls. We’re going after them,” said Mike Anderson, government affairs chairman for the National Association of Mortgage Brokers.
To calculate the national average,Hollister, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Brokers are getting more business, but they have to work for it.
Rates on home loans have been falling since the spring. Investors worried about the European debt crisis have shifted money into the safety of Treasury bonds. That has forced those yields down and mortgage rates tend to track yields on Treasury debt.
Brokers are reporting rising interest in home refinancings as rates on a 30-year fixed loans have hit record lows in four of the past five weeks. This week the average rate fell to 4.56 percent, the lowest since mortgage company Freddie Mac began tracking rates in 1971.
Weekly applications to refinance home loans have nearly doubled in July from April, according to the Mortgage Bankers Association.
“If they can get a $100 difference in their monthly payment, they are going for it. I had one guy who was very excited to save $33 a month after refinancing into a 15-year loan,” said Pava Leyrer, president of Heritage National Mortgage in Michigan.
