The phones have been ringing more than usual at Hunt Valley Mortgage in the past couple of weeks, says business owner Don Lagator.
Consumer activity spiked after the Federal Reserve lowered its key interest rate to 3.5 percent last week, said Lagator, who founded Hunt Valley Mortgage 15 years ago.
“The last Fed action generated quite a bit of activity,” Lagator said. “Some interest has been stimulated in the home-purchasing arena, but most of what we?re getting calls about is people who want to refinance.”
Mortgage rates have declined to near-record lows, at times dipping below 6 percent. That?s good news for borrowers with good credit who want to refinance an adjustable-rate mortgage.
“These are very competitive rates,” Lagator said. “My feeling is, based on the government?s activity and the lenders? desire to maintain business, they will work hard to keep rates at this level.”
Refinance applications are up 92 percent and purchase applications are up 7 percent since the beginning of November, according to the Washington-based Mortgage Bankers Association.
“It?s a great time to refinance if you have a good credit history and a Freddie Mac or Fannie Mae mortgage,” said Kathleen Murphy, president and CEO of the Maryland Bankers Association.
Murphy said there?s a “very good possibility” mortgage rates could continue to fall, as the Fed has shown it could again lower interest rates. “When the Fed lowers its rates, that leads to favorable rates for consumers.”
Richard Clinch, a University of Baltimore economist, called lower mortgage rates “a good-news, bad-news story” because they have a downward effect on savings rates.
“At this point, the rates are so low, it?s one of the ways we?re hoping we get out of this housing crisis,” Clinch said. “I don?t know how much lower they can go.”
Even with rates approaching all-time lows, Clinch said he doesn?t believe buyers will soon return to the market.
“I think it will take until 2009 before people start buying again,” Clinch said. “There?s just too much uncertainty in the economy right now.”
