The refi wave appears to have crested and baby-boom mortgage conversions seem to be waning, two new surveys indicated.
The Mortgage Bankers Association's Refinance Index slumped 6.6% to total 827 in the week ending May 28. The index now stands nearly 44% below its peak of 1465.6 just 11 weeks earlier on March 12. The index uses March 16, 1990, as a base point for 100.
Refinancings constituted 44.5% of all loan applications and 44.7% of all loan volume.
Meanwhile, the Federal Home Loan Mortgage Corp. says homeowners who did refinance their 30-year loans during the first quarter were far less likely to switch to 15-year mortgages than they were in preceding quarters.
Lending experts had attributed the trend toward 15-year and other, even shorter-term loan lives as signs that baby boomers in their 40s were trying to get mortgages that would be completed before they hit age 65 and retired. This new drop in popularity--to 29% of all refinanced 30-year deals in the first quarter from 46% in the year-earlier period--could mean that most baby boomers who wanted a more comfortable payoff period got what they wanted.
"Two types of homeowners are refinancing: those who refinance into 30-year mortgages want lower payments, while those preferring 15-year mortgages want to pay off their loans faster." said Robert Van Order. Freddie Mac's chief economist. "Two of the determining factors are the homeowner's age and how long they have been in the house."
While 30-year mortgages are getting more popular, their percentages are still below average, Van Order said. Sticking to 30-year deals accounted for as much as 69% of all 30-year refininancings as late as 1990
MBA Chief Economist David Lereah noted that demand for mortgages remains strong even if refinancings aren't as alluring as they so recently were. Loan application volume as of May 28 was 83% above where it stood a year earlier, the survey showed. Shifting Tastes People who refinanced their 30-year mortgages in thefirst quarter were far more likely to stick with a 30-yearloan than to move to a 15-year one. Here's how the 30-15split has changed in the recent past. % kept % changed % changed to at 30-year to 15-year another type1st Qtr '93 49% 29% 21%4th Qtr '92 41 40 193rd Qtr '92 42 42 152nd Qtr '92 41 40 191st Qtr '92 40 46 144th Qtr '91 45 39 15Source: Freddie Mac