The great housing debate continues, and this is another week for the bears. That is, unless you are looking to refinance at a lower rate and not among those caught up in the backlog of demand.
The average 30-year fixed-rate mortgage hit a new record low, again, of 3.83% last week, down just a tad from 3.84%, according to mortgage giant Freddie Mac (FMCC.OB). The 15-year averaged lower as well, at 3.05%, down from 3.07%.
The latest data mark the second straight week of record low rates. Rates touched 4% briefly earlier this spring but have yet to return as a string of economic concerns weigh.
"Following April's weaker than expected employment report, and the French and Greek election results raising concerns over the stability of the Euro currency zone, long-term Treasury bond yields declined allowing fixed mortgage rates to ease to new all-time record lows this week," said Frank Nothaft, vice president and chief economist at Freddie Mac.
As we mentioned yesterday, not everyone has been able to take advantage of the low rates, in part because of backlog at large banks. But for those who are willing and able to navigate the process, it's worth it.
CreditSesame.com says its data shows that homeowners are costing themselves an average of $4,788 a year, or $399 a month on average over the life of a mortgage, because they don't own the best loans they're qualified for. And that's net of any administrative charges they would face to refinance.
"Refinancing is thought to be a painful, time-consuming process and to a large extent it is true," says CreditSesame's mortgage authority Tony Wahl. "Overall, consumers just don't feel that they are in control of the process and as such are less likely to act as a result."
Underwater homeowners are the most reticent to act, says Wahl. Programs such as HARP II and FHA Streamline refinance products help underwater consumers "but you still don't see consumers clamoring for details," he says. "Many underwater homeowners seem to have given up; they think of their home as weight around their neck and have given up on the dream of owning their home outright."
Those who have been in their homes a long time are also reticent. "They feel that by refinancing they'll be effectively resetting the clock and returning to square one even though they might be able to drop their interest rate significantly," he says, adding that they aren't generally aware of the variety of loan products and loan terms that could be used to improve their finances.
Of course, not everyone is motivated, nor obligated, to help. Reduced rates mean the lenders will make less per payment, and in some situations the bank that you make your payment to might not own the mortgage anyway. And although Wahl says lenders in general are highly motivated to originate new loans, "many of the aggressive programs that you hear about in the news get significantly watered down by guideline overlays before they hit the streets," he says.
What do you think? Have you been able to refinance lately? What was the process like? Let us know in the comment section below.