Refis Surge as Rates Hover Around 5 Percent
October 27, 2009
With mortgage rates reaching historic lows, Zillow Mortgage Marketplace reports a surge in refinance request activity within its free marketplace for custom mortgage quotes.
In the first half of October, as mortgage rates dropped below 5 percent, consumer interest in refinancing soared. The number of refinance requests for the first half of October versus the first half of September increased by 39 percent, making up more than half (51 percent) of all consumer loan requests. This is up from the first half of September when refinance requests made up only 41 percent of all requests.
Current mortgage rates are significantly lower than they were just a few months ago. Today's average 30-year rate of 4.9 percent is now 60 basis points lower (11 percent) than it was in June, when the 30-year fixed rate was at 5.5 percent, the highest level this year.
That means that on a $200,000 loan (assuming a home price or value of $250,000), the monthly principal and interest payment would now be $1,064.42 versus $1,141.61 for the same loan in June, saving a borrower $27,788.40 over the life of a 30-year loan.
"Current low interest rates are a key factor in consumers deciding to refinance their existing loans or to buy a new home. Shaving just a fraction of a percentage point off an interest rate can mean saving thousands of dollars over the life of the loan. When rates drop to record lows – as they are now according to data from Zillow Mortgage Marketplace – we see homeowners move quickly to take advantage," said Stan Humphries, Zillow chief economist. "But, as the Federal Reserve ramps down its purchase of mortgage-backed securities, I expect rates will rise somewhat by the end of the first quarter of 2010."