Alexandria's mortgage specialists are fielding a lot of phone calls this week.
Global economic concerns about the effects of the novel coronavirus (COVID-19) have led to some wild stock market swings in the United States, and that has contributed to much lower interest rates.
Amerisbank mortgage specialist Toni Miller, who works in Alexandria, said she's received a huge number of calls.
Typically, it's worthwhile to refinance if a homeowner can recover the costs of refinancing within 2 years, or if there is a half-point decrease in the interest rate. However, a variety of factors can change that, including the applicant's credit score and length of time left on the mortgage, the greater financial environment and other factors, Miller said. Even if you're not sure if you can save money, it may be worthwhile to call and ask.
The Mortgage Bankers Association reported Wednesday that the drop in mortgage interest rates led to an increase in refinance applications of 26 percent in the past week. Compared to a year ago at this time, refinance applications are up by 224 percent.
It's unlikely these low rates will last too long. How long is "the $1 million question," said Christian Hartung, an Alexandria-based mortgage specialist with Rate.com.
Hartung thinks that the stock market volatility will last a few weeks because of coronavirus concerns. Once the stock market stablizes again, mortgage rates may rise.
Although the Fed unexpectedly cut lending rates earlier this week, that cut has very little to do with suddenly lower mortgage rates. One of the reasons for that is because Fed rates cuts are focused on short-term borrowing, and a mortgage is usually a decades-long commitment. In addition, when the Fed cuts its rates, borrowers often leave more secure investments like bonds for riskier investments like the stock market.
Homeowners with a home equity line of credit (HELOC), which often comes with a variable interest rates, may see lower payments in the short-term in the coming months.
