Mortgage brokers say they’re up at 2 in the morning counseling borrowers who are agonizing over whether they should refi now or wait for rates to fall even more.
They may have reason to hold off. Ten-year Treasuries, which tie closely to mortgage rates, have fallen to nearly the lowest levels since the 2016 presidential election as a trade war rages, negative yields proliferate overseas and a series of central bank moves spark concerns about global growth.
“Every day in the last week or 10 days there’s been more bad economic news,” said Mark Goldman, a loan officer at C2 Financial Corp. in San Diego. “How many other shoes are going to drop to push rates down?”
Goldman said he’s advising clients leaning toward refinancing to do it soon. Since he started in 1991, he said he’s noticed most borrowers who try to time the market mess up and don’t come calling until rates begin to rise again.
Recent Uptick
Ben Coulter, a branch manager at AMEC Home Loans in Minneapolis, said he noticed an uptick in refinancing starting about six weeks ago. The surge in interest has pushed the time it takes to close on the mortgages to about 45 days from about 30 when business is slower. He’s pulling 16-hour days and sending emails at odd hours, sometimes to clients who bought their homes less than a year ago. He said one customer who bought in November has already refinanced, reducing his monthly payments by $250.
“The amount of savings out there for people who even closed last fall is amazing,” Coulter said.
Refi booms, however, carry risks for mortgage-backed securities.
When a home loan is refinanced, the original mortgage is paid off and removed from the security. Faster prepayments can hurt investors that paid more than 100 cents on the dollar for mortgage bonds because they get their principal back sooner than expected and at par, cutting into returns. Prepayment speeds on Fannie Mae bonds backed by 30-year mortgages across interest rates rose 29% in July.
What’s a problem for investors is an embarrassment of riches for mortgage companies, which are also dealing with the typical seasonal increase in home buying.