There is a silver lining to the recent economic turbulence: Mortgage rates have tumbled in recent weeks, triggering a rush to refinance and a race to the closing table for many Twin Citians.
At the end of last week the average conforming 30-year fixed-rate mortgage (FRM) fell to 3.6%, according to a weekly survey by Freddie Mac. That is nearly a full percentage point lower than last year at this time and the lowest in nearly three years.
"The mood is good," said Keenan Raverty, vice president for Twin Cities-based Bell Bank Mortgage, which is seeing a significant increase in mortgage applications for both purchases and refinancings.
Recent home buyers are also celebrating.
At the current rates, about 183,000 Twin Cities homeowners are now eligible to refinance, saving them on average $259 per month, according to Black Knight, a provider of analytics to the mortgage and housing industries. That is compared with 20,000 homeowners who would have been eligible to refinance in November when the average 30-year FRM was just under 5%.
For those eligible homeowners — generally those who can shave a half- or full- percentage point off their rate — the savings could be significant. For example, a person who took out a $250,000 30-year mortgage at the beginning of the year at 4.5% would save $132 per month on their $1,268 monthly principal and interest payment by refinancing, a total savings of $47,000 over the life of the loan.
"It's certainly true that lower rates have sparked the refi market pretty strongly, and this even includes folks who got rates as recently as the beginning of this year, which is pretty unusual," said Keith Gumbinger, vice president at HSH.com.
At Bell, more than 80% of the mortgage applications are from home buyers, but other lenders are reporting a much higher share of refinancing volume.