New Refi Boom In Wings?
BEAVERTON, Ore.-The ongoing sovereign debt crisis in Europe could lead to another surge in mortgage refinance volume this summer, but CUs should temper their optimism.
"If rates continue to fall I would anticipate another mini refi boom, maybe not as much last year because much of that was caused by consumers fleeing their banks and escaping subprime mortgages," said Gayle Gustafson, VP Financial Services at Rivermark Community CU.
While many in the industry expected rates to slowly return to historical norms, frightened investors buying up Treasury bills have instead sent rates back towards record lows. Mortgage rates, which are hovering just under 5% at present, could drift towards the 4.5% mark that precipitated the refinance boom last year.
"We've got a product that we started in the middle of April that is a 10-year mortgage and it's just a refi. It is an incredibly hot product right now," Gustafson pointed out. We're doing it for a very low fee ($300) and we're able to do that because we're processing them like a second mortgage."
Rivermark Community is also offering a 3.99% APR on the 75% LTV loan, which maxes out at $100,000. Gustafson noted that most members taking advantage of the new offering are long-time homeowners who did not participate in other recent refi booms because of excessively high fees.
Not All Agree
But Keith Reynolds, VP Lending/Business Services at Peoria, Ill.-based Citizens Equity First CU, believes that potential borrowers who wanted and could get a refi have already done so.
"In terms of refis, I believe that the window of refinance volume is largely limited to those loans which were closed in the six months or so in the middle of 2009 when rates kind of topped out," he told Credit Union Journal. "I think there is a general consensus that most borrowers prior to that had financed if indeed they were going to."
Recently released Case-Shiller data showed an index decline of 3.2% in Q1, and while prices are up slightly year-over-year, a rebound is uncertain. Reynolds believes the lack of value stabilization will weaken confidence and scare potential buyers.
"The existing home sales report which came out May 24 was pretty bearish for home sales looking forward, with the expiration of [the tax credit] moving sales forward into April and the supply of homes on the market jumping 11.5% to 8.4 months.," he told Credit Union Journal. "Those two factors create an environment for the risk of price erosion in the months ahead. It's hard to believe consumer confidence will rise above those concerns if they materialize."