Refinancing the mortgage on their four-bedroom Everett house has saved Ken and Susan Riker $250 a month — money that will come in handy now that they’ve added a baby to the family.
"It’ll go toward diapers," Susan Riker said Thursday as 5-month-old Molly gurgled and grinned on her lap.
The Rikers refinanced their mortgage at Cascade Bank last week, acting fast to take advantage of low interest rates that seem to be disappearing.
"I’d doubt they’d go any lower," Susan Riker said. "When it hits the bottom, you’d better do it."
Fact is, mortgage rates are drifting downward after spiking up in July and August.
But lenders say that while the lower rates have spurred some fence-sitters into action, they haven’t encouraged a rebound in mortgage and refinance applications, suggesting that maybe everyone who was in a position to refinance already has.
"The pipelines are not filling back up again," said Jay Tejera, a Northwest banking analyst with Ragen MacKenzie in Seattle. "You had a lot of people doing it every 90 days. Those people got their loans closed this summer."
After months of hovering at or near record lows, interest rates shot upward this summer, climbing nearly a full percentage point.
That put a serious crimp in the long-booming mortgage business. Washington Mutual, the nation’s second-largest home lender, reported its mortgage and refinance business dropped 40 percent in August, compared to July’s totals.
But since the summer spike, rates have fallen back, in some cases dropping daily, said Dave Dorsey, who oversees residential lending for Frontier Bank.
Rates on 30-year fixed mortgages have fallen to about 5.75 percent in Snohomish County. The average of the six lenders surveyed weekly for The Herald was 5.726 percent, according to information reported by Informa, the service that does the surveys.
That’s down almost six-tenths of a percentage point since the end of August, and the lowest rates have been since mid-July, when interest rates began to climb after months at or near record lows.
"They’re quite a bit lower than they were three weeks ago," Dorsey said. "We’re kind of back to where we were early in the summer, late in the spring, when we were so busy we didn’t know which way was up."
The summer’s increase was an "extraordinary" response to a couple of factors, said Jay Tejera, a Northwest banking analyst with Ragen MacKenzie in Seattle.
First came what some are calling a "head fake" from Federal Reserve board Chairman Alan Greenspan. The loan market was expecting the Fed to lower rates a half-point this spring. Instead, it lowered them by a quarter, triggering a market response that raised mortgage rates.
And it also now appears that during the summer, major investors had bought up huge amounts of 10-year Treasury bills, the benchmark investment vehicle whose values influence loan rates. That also helped push rates up, Tejera said.
After all that upheaval, "for now, things like to be pretty much in balance," he said. As a result, rates are coming down.
But while rates are back to where they were early this summer, loan business is not.
"Originations are down, there’s no question about that," said Dorsey. "An awful lot of people have already re-financed, in some cases multiple times."
There has been some increase, said Debbie McLeod, the vice president of retail banking for Cascade Bank.
"There were a lot of people who were sitting on the fence," she said. Those people decided "it’s time to make a move and do something now. Rates aren’t going to get any lower."
That summer surge of fence-sitters will lead to some strong third-quarter numbers, Tejera said. But looking ahead, it appears that refinancing will taper off.
"The mix is changing," he said.
McLeod said her bank is shifting emphasis from refinancing to writing new mortgages. Low rates continue to help make home ownership more feasible, she said. Cascade also anticipates it will write more adjustable-rate mortgages, because those rates remain well below rates for 30-year loans.
Tejera agreed. "You can still get adjustable rate products for 3.75 or 3.5."
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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