Low interest rates spur local mortgage refinancing rush

Mortgage bankers are slammed, as people seek to lock into 30-year conventional fixed-rate mortgage loans with interest rates at 5 percent or less.

In recent years, the interest rate on such fixed-rate loans has hovered at about 6 percent, said Stephen T. Thacker, vice president and branch manager of SunTrust Mortgage Inc. in Richmond. SunTrust is one of the leading mortgage providers in Virginia.

"A rate this low is kind of a gift," Thacker said. "In my 30-year career, there's only been a handful of months that rates have been this low. Generally, they don't stay there long."

The lowest rates traditionally are offered to people with excellent credit.

The rate on a 15-year conventional fixed-rate loan is basically the same as a 30-year. Adjustable-rate mortgages, historically cheaper than fixed rates, have higher interest levels.

During the last refinance boom, about four years ago, rates touched this low briefly. "But not many people caught it," Thacker said.

"The big question is whether I think rates will go lower," he said. "My answer is, 'Do not gamble away your chance.'"

Typically, when rates fall, house prices go up, Thacker said. "This time, rates are low and it's a buyers' market."

In the first half of November, lenders were trying to find a loan to make, Thacker said. "There was very little business going on."

The mortgage business has contracted in the past two years in the slow real estate market, as companies went out of business, agents left and the number of products shrank, he said.

With this surge in business, "we are very quickly going to hit capacity," Thacker said. Vendors, who process the paperwork for loans, are backed up, he said.

Not only is the refinance business increasing, but the purchase business has picked up as well, he said.

Alicia O'Brien, president of the Richmond Mortgage Bankers Association and a senior loan officer at Prosperity Mortgage in Richmond, said she is swamped with business.

"With the 30-year fixed-rate loan, we are saving people lots of money and getting them into stable loans," she said.

"The phone lines are melting," said Steve Mills, a home mortgage consultant with Wells Fargo Home Mortgage in Midlothian.

It makes sense for borrowers to refinance if they plan to stay in their homes for more than two years, to help recoup the closing costs of a new loan, he said.

Also, borrowers should consider a refinance if they can lower the interest rate by a percentage point or more.

Contact Carol Hazard at (804) 775-8023 or .