Refinancing once again on the rise Higher rates prod homeowners to act

August 01, 1993|By Lorraine Mirabella | Lorraine Mirabella,Staff Writer

Another refinancing boomlet has been slow to arrive, but it seems to finally be here.

"A lot of people who were sitting on the fence decided to come in and do something," said Keith W. Stackhouse, president of Atlantic Residential Mortgage Corp., a Bank of Baltimore subsidiary.

"Many homeowners are perceiving that interest rates bottomed out a few weeks ago and have started to move up, and that if they're going to catch the refinance wave, they should catch it now."

Refinancings peaked in March, then slowed, but lenders said last week inquiries have begun to pick up slightly once again.

The aftershock of homeowners angling for better rates includes fence-sitters reacting to warnings from Federal Reserve Board Chairman Alan Greenspan that short-term interest rates will have to go up at some point, analysts said.

In addition, national mortgage rates have gone up for the second week in a row. As of Thursday, the average 30-year fixed rate rose to 7.25 percent, from the previous week's 7.20 percent, the Federal Home Loan Mortgage Corp. reported. The rate had declined for five weeks in a row, to 7.16 percent on July 15, before rising the past two weeks.

In Baltimore, the average rate rose to 7.31 percent from 7.13 percent, according to HSH Associates, a New Jersey firm that tracks mortgage rates.

In July, for the first time in several months, the number of mortgages written on refinancings outpaced the number written on newly purchased houses, said Frank E. Nothaft, deputy chief economist of the Federal Home Loan Mortgage Corp., also known as Freddie Mac. Refinancings accounted for more than half of all mortgages written, the highest percentage since September, a national Freddie Mac survey showed.

"This is quite clearly a response to the lowest mortgage rates in 25 years," Mr. Nothaft said. "I've been saying for a number of months they're at the bottom, and they keep going lower, but I think we're at the bottom now," where rates should remain at about 7.25 for the summer.

Though refinancings slowed in June and early July, they remained at a consistent flow, said Gene Lugat, vice president of Paine Webber. He pointed out, though, that the current increase in refinancings has come at a much slower pace than during previous waves.

"The majority of people who wanted to refinance have refinanced in the past 18 months," he said.

Mr. Lugat encourages anyone with a rate of more than 8 percent to look into refinancing, even if they did so as recently as a year ago.

"If anybody is waiting for rates to drop, it may be ill-advised," he said.

But that doesn't mean rates will shoot back up to all-time highs either, said Keith T. Gumbinger, an analyst with HSH Associates, cautioning that the Fed chairman's comments should not cause panic.

Mr. Nothaft predicted that mortgage rates would remain affordable for the next year or so.

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