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May 11
With mortgage rates dropping at a record pace, homeowners are going in herds to financial institutions to refinance their homes.
This is very similar to a decade ago which led to the real-estate boom.
The Mortgage Bankers Association reported about 80% of all mortgage applications are for refinancing. The average 30 year fixed mortgage rate is 4.73% which is down from 6% about a year ago. Wells Fargo recently reported improved results as a result of the increase in mortgage applications writing over $101 billion in mortgage loans for the quarter which is the most since 2003.
There was an increase of 52% in first quarter profit as a result of the increase in the workload it required them to recruit to approximately 5,000 employees to assist with the volume. Wells Fargo believes that this rush will continue through the next quarter.
Not every homeowner will experience savings due to the high refinancing fees. Others are converting their adjustable mortgage rates with fixed fee rates. Many homeowners are seeing a decrease in their home values which makes it unattainable to refinance their homes.
The U.S. government has put in place programs to lower interest rates and increase the housing market. An example of this is The Federal Reserve announced late last year that they were buying mortgaged backed securities.
The government programs were put in place to help the struggling housing market, encouraging homeowners to refinance, and help them from foreclosing on their homes. Also, it would improve the economy as well as helping financial institutions boost profits.
Thus, financial institutions are having difficulties in expediting refinances on a timely basis due to the rush for homeowners to refinance.
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