Interest rates for 30-year fixed loans have remained below 9% for at least two weeks - longer in some parts of the country. Those low rates, coupled with the coming spring homebuying season, could mean a pickup in activity for lenders, particularly in fixed-rate products.
The last time offering rates nationally dipped below 9% was the week ended Sept. 30, when rates were 8.91%, according to HSH Associates, Butler, N.J.
Borrowers may not yet be clamoring for these loans, but their interest has been piqued. There is also a psychological impact on customers when rates go lower than expected, according to lenders.
"This week we sent out more applications than we did all year," said Mary McGorry, vice president at Chase Manhattan Personal Financial Services, New York. But customers are still going with adjustable-rate loans, she said.
"Once we talk to them, we find that they only stay in the property six or seven years," she said, so most customers go with a five-year ARM. Customers are confident rates will stay low, and they don't want to lock in rates by going to fixed loans, she said.
Another lender has seen a significant increase in customer interest in the 30-year fixed loan and in applications.
"We're definitely seeing interest in fixed loans," said Rick Lovett, executive vice president at PNC Mortgage Corp., Pittsburgh. "Interest clearly upticked when rates went below 9," he said.
PNC had a 21% increase in applications in February from the previous month, and the declining rates are adding fuel to that fire, he said.
Generally, there has been a pickup in lending activity over the last five weeks, said David Lereah, chief economist at the Mortgage Bankers Association. "Not a huge pickup, but a pickup."
He added that lenders say there is less ARM activity and more interest in fixed loans as a result of the shrinking spread between the interest rates.
"As long as the economy continues to exhibit some weakness in term of economic indicators, this rate environment should continue for at least the next two quarters," he said.
Some lenders have noticed a significant increase in activity and popularity for fixed-rate loans.
Robert St. John, first vice president at Liberty Mortgage Corp., Atlanta, has seen such a brisk increase in applications for the 30-year fixed loan that he called it the "flavor of the week."
Jane Potter, senior vice president at Countrywide Credit Industries, Pasadena, Calif., said that since October, 30-year fixed volume has gone from 50% of the company's business to 70%.
"People are calling about fixed loans; they want to lock in while rates are low," Ms. Potter said. Because the Federal Reserve has raised short- term interest rates seven times in the last year, many people are leery of the possibility of rates going up again and want to go with a fixed-rate loan while rates are low, she said.
