6 percent or less.
Rates are expected to skip around between 5 percent and 6 percent as the Federal Reserve, which meets next on March 18, tries to avoid a nationwide recession. Investors expect the Fed will lower interest rates by another half a percentage point.
Several Missoula lenders said the volume of mortgage refinancing has doubled recently. Many took advantage of a brief window in late January, locking borrowers into 30-year fixed rate loans at rates as low as 5.25 percent.
Rebecca Babin, a real estate loan officer at Community Bank Missoula, said interest in refinancing remains high, even though rates have climbed above 5.5 percent.
“It is a mini-boomlet and I hope that it continues,” she said. “Rates have been great for the last couple of weeks and people are finally starting to pay attention to it.”
Rob Vallance, a home loan consultant at Countrywide, said the volume of refinances doubled in January and February as compared with the same time last year.
Rates on a conventional 30-year fixed mortgage rose to 5.75 by Friday. On Thursday, Federal Reserve Chairman Ben Bernanke indicated more cuts are possible to reignite a faltering national economy.
The Fed lowered the federal funds rate by
1.25 percent last month. But the overnight rate mainly affects short-term loans, such as car loans and home equity lines, and doesn't always translate into lower rates for long-term loans such as mortgages.
Cathy Swofford, owner of Missoula Mortgage, said about 70 percent of her business these days is refinancing mortgages.
“This started just before Christmas and then in late January, when the rates were the lowest in about two years, it created a frenzy,” she said.
Lenders said the rule of thumb is to refinance when rates are 3/4 to 1 percentage point lower than a borrower's current mortgage.
As borrowers become aware of the lower rates, they are calling Missoula area lenders.
Lenders said borrowers who refinance fall into three categories.
Many are borrowers with adjustable rate mortgages who want to convert into a fixed-rate loan before their ARMs reset.
Secondly, there are people who bought homes in the last 12 months, when rates were around 6 3/4 percent, who want to shave their payments. They aren't so far into the tenure of their loans that “resetting the clock” is a disadvantage.
Last, people with considerable equity in their homes are refinancing and extracting money for a cabin, lake house, condo or other investment.
With the demise of the subprime mortgage market last summer, several loan options have vanished.
Astrid Oliver, a loan originator at Capital Family Mortgage, said the popular 80/20 loan has gone away. This is basically two loans - one for 80 percent and the second for 20 percent - helping people avoid paying private mortgage insurance if they don't have a sufficient down payment.
Many of the low-document or no-documents loans have disappeared, especially for people with blemished credit.
Swofford said people who want to consolidate debt with a home equity loan are finding them harder to get these days.
“That is because lenders are pulling them off the market because they aren't as profitable,” she said.
Montana, like some other Rocky Mountain states, has been less affected by the subprime mess than has Michigan, Florida, Nevada and California.
Missoula - as well as Austin, Texas, Salem, Ore., and other cities - never experienced the steep runup in housing prices, and so prices remain fairly firm.
Bruno Friia, owner of Lambros Real Estate, said Friday now is a good time for homebuyers in Missoula County - given the wide selection of inventory, low mortgage rates and attractive home prices.
Friia said Missoula's market remains strong, cautioning buyers not to get spooked by the doomsday described by national publications.
“In any market, all real estate is local,” he said. “I don't play the stock market, but I know real estate. This is a good opportunity to buy.”
Reporter Pamela J. Podger can be reached at 523-5241 or at pamela.podger @missoulian.com
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