Banks See Spike In Refinancing Applications
Federal Reserve Cuts Interest Rates
Updated: 9:08 pm CST January 24, 2008
MADISON, Wis. -- Refinancing applications have surged 17 percent after interest rates dropped three-quarters of a point in the past week -- and they could go lower.
VIDEO: Watch The ReportBut financial experts said it is important to know when it's best to refinance and if the type of loan a consumer has is even affected by this week's federal rate cut.Don Bertucci, AnchorBank's senior vice president of residential lending, said the last few days have been hectic. He said the phones have been ringing and the online applications have been coming in, all in response to this week's rate cut by the federal reserve.So, what does the 0.75 percent rate cut mean for residents?"It would affect mostly second mortgages or home equity lines of credit, where the rate is adjustable," Bertucci said. "It moves with the rates in the market. Many times when the Fed cuts the rates, the public feels that's going to equal the same cut in mortgage rates."Bertucci said that's not necessarily true. But he said consumers who are calling in about refinancing their homes are finding that the rate they're paying is much higher than the current 30-year rate."It generates phone calls. It generates interest, because people will see that and they'll call and say, 'Well, my rate's this. What is the current rate today?' So, just the fact that interest rates were cut generates activity on the part of the general public," Bertucci said.So, when is a good time to refinance? Bertucci said if it will save money -- counting the closing costs -- refinancing might be the way to go. With this most recent rate cut aside, the current 30-year mortgage rate is hovering right around 5.65 percent.Those who decide to refinance will face tougher standards due to the current credit crunch. Experts said people should be prepared to provide full documentation, including copies of their past two tax returns, three consecutive pay stubs, and bank statements for the past two to three months, to prove they have the money for closing costs.In some cases, consumers will need a credit score of at least 700. And if they have missed a mortgage payment in the past 12 months, they might not qualify.Experts said people can possibly save a lot of money, but first they will need to prove to the banks that they are worthy of a loan after the recent credit crisis.
VIDEO: Watch The ReportBut financial experts said it is important to know when it's best to refinance and if the type of loan a consumer has is even affected by this week's federal rate cut.Don Bertucci, AnchorBank's senior vice president of residential lending, said the last few days have been hectic. He said the phones have been ringing and the online applications have been coming in, all in response to this week's rate cut by the federal reserve.So, what does the 0.75 percent rate cut mean for residents?"It would affect mostly second mortgages or home equity lines of credit, where the rate is adjustable," Bertucci said. "It moves with the rates in the market. Many times when the Fed cuts the rates, the public feels that's going to equal the same cut in mortgage rates."Bertucci said that's not necessarily true. But he said consumers who are calling in about refinancing their homes are finding that the rate they're paying is much higher than the current 30-year rate."It generates phone calls. It generates interest, because people will see that and they'll call and say, 'Well, my rate's this. What is the current rate today?' So, just the fact that interest rates were cut generates activity on the part of the general public," Bertucci said.So, when is a good time to refinance? Bertucci said if it will save money -- counting the closing costs -- refinancing might be the way to go. With this most recent rate cut aside, the current 30-year mortgage rate is hovering right around 5.65 percent.Those who decide to refinance will face tougher standards due to the current credit crunch. Experts said people should be prepared to provide full documentation, including copies of their past two tax returns, three consecutive pay stubs, and bank statements for the past two to three months, to prove they have the money for closing costs.In some cases, consumers will need a credit score of at least 700. And if they have missed a mortgage payment in the past 12 months, they might not qualify.Experts said people can possibly save a lot of money, but first they will need to prove to the banks that they are worthy of a loan after the recent credit crisis. Copyright 2008 by Channel 3000. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
