LITTLE ROCK — Mortgage rates are at their lowest levels on record and mortgage lenders are busy refinancing thousands of loans.
The interest rate on a 15-year mortgage was at 2.75 percent Monday for borrowers with excellent credit, Little Rock mortgage lenders said. For a 30-year mortgage, rates are as low as 3.25 percent.
“These are historic rates, rates we’ve never seen before,” said Jim Carroll Jr., executive vice president of Carroll Mortgage Group in Little Rock.
“Refinance application volume [nationally] jumped to the highest level in more than three years as each of the five mortgage rates in our survey dropped to new record lows,” Mike Fratantoni, vice president of research for Washington, D.C.-based National Mortgage Bankers Association, said in a prepared statement this month.
The Federal Reserve helped to push rates to their low levels as it bought significant amounts of mortgage backed securities, Fratantoni said in the statement.
Bill Roehrenbeck, chief executive officer of Arvest Mortgage Operations, said Arvest has had to hire additional mortgage lenders to keep up with demand.
Arvest was unable to specify the number of mortgage lenders it has hired, said Jason Kincy, a bank spokesman.
But the bank’s mortgage division expects to pass $2 billion in mortgage originations and refinancings this month, higher than the previous one-year record of $1.95 billion in 2010, Kincy said. The bank expects to exceed $2.5 billion in mortgages this year, Kincy said.
“With the continued lowering of interest rates by the Federal Reserve, we’ve stayed very busy all year with refinance activity as well as purchase activity,” Roehrenbeck said.
People have refinanced at the lower interest rate but kept the term at 30 years to provide savings for their monthly budgets, Roehrenbeck said. And some have reduced a 30-year loan to a 15-year loan at a similar monthly rate to save thousands of dollars of interest, Roehrenbeck said.
A homeowner with a $250,000, 30-year mortgage with 5.25 percent interest would have monthly payments of about $1,380 and pay almost $247,000 in interest over the 30 years.
But if the borrower refinances the $250,000 loan to 15 years at 2.75 percent interest, monthly payments would rise to about $1,696, but the borrower would pay about $191,600 less in interest over the shorter term.
The percentage savings in interest are similar on a $100,000 loan.
On a $100,000, 30-year mortgage at 5.25 percent, the monthly payments would be about $552 with total interest of $98,792 over 30 years.
For a $100,000, 15-year mortgage at 2.75 percent, the monthly payments increase to about $678, but the borrower pays about $76,600 less in interest over 15 years.
Carroll recalled a customer who was considering taking out a 30-year mortgage.
“I showed him the 15-year mortgage,” Carroll said. “His [monthly] payment was going to go down maybe $80, but he was also going to save over $78,000 in interest. This gentleman had no plans of moving, so that was a no-brainer.”
It’s difficult to determine how low rates may fall, said Roehrenbeck, adding that rates are the lowest he’s seen in 40 years in the mortgage business.
“It’s conceivable they could go slightly lower,” Roehrenbeck said. “But I would think we’re in such a very low interest environment right now that at some point you have to believe that inflation or for some other reasons that rates would go back up. This is an opportunity you wouldn’t want to miss.”
Business, Pages 19 on 10/09/2012