Low rates continue to lure home refinancers, purchasers

Record low rates are bringing new home buyers and refinancers to the closing table.

Locally, as of mid-July, 30-year fixed rates dropped as low as 6.375 percent, and 15-year fixed rates dipped as low as 5.78 percent.

Empire Bank's 6.5 percent on a 30-year fixed-rate mortgage "is the same rate as the low point last year, which was a new record for the last 25 years or so," said John Cunningham, Empire Bank vice president.

Kim Warren, Great Southern manager of residential lending, estimated the highest rate in the past 12-month period hovered around 7 percent, still an attractive rate for long-term mortgage debt.

Loan officers have seen a rejuvenation of interest in refinance requests since the flurry when interest dropped last year.

During last year's interest drop, more than half of Commerce Bank's residential real estate loans were refinances. The surge waned when rates crept up slightly, but the demand is showing a comeback with the current rate reduction, said Kim Otte, assistant vice president at Commerce Bank.

Cunningham said refinance loans in his department almost doubled in July compared to June. He added that applications for new purchase loans had risen, as well.

Loan officers take the rate game on a day-by-day basis. According to Otte, some economists feel 6.5 percent is near bottom, but it is a guessing game even for the experts.

Lenders agree that with mortgage loan rates tied to the bond market typically opposite the stock market drastic rate increases do not seem likely in the near future.

Home equity loans

Home equity loans, which are usually variable-rate products tied to the prime rate, have become popular with debtors seeking to use equity in their property to pay off higher rate debts, according to Karen Kroutil, branch manager in consumer loans at Commerce Bank on Battlefield.

The flexibility of these loans makes them attractive to homeowners, who can use their equity to finance home improvements and take out only as much as they need when they need it, Kroutil said. As a line of credit, the amount of money used can go up and down throughout the duration of the loan.

Commerce's equity loans expire in 10 years, at which time the terms may be renegotiated. The variable-rate loan product has a floor of 5 percent interest and a cap of 20.04 percent, Kroutil said.

Some people are not aware there is a floor. In the past rates have been high enough that it has never come into play, she said.

"There's always been a floor, but nobody has seen the bottom," she said.

Great Southern's variable rate home equity loans have a floor of 6 percent and a cap of 19.5 percent.

"A lot of people are taking cash out of their equity to pay off other, high-interest loans," Warren said.

Jim Binns, vice president, consumer loan manager at Empire said his loan department offers both fixed and variable rate home equity loans. The fixed rate loans, under 75 percent loan-to-value, start at 7.25 percent for a 48-month loan and graduate up for longer time periods.

Variable rates start at prime plus 0.5 percent for up to 85 percent loan-to-value. The interest rates are capped at 20 percent.

Consumers can benefit from low rates when buying cars as well as homes. At Empire new car rates can vary from 6.5 to 7.75 percent, according to Binns.

Three factors are considered. The rate depends on the dollar amount of the loan, credit scores and the type of vehicle purchased, he said.

Commerce's used car rates can range from 7.35 to 11 percent. "Besides the type vehicle, pricing is credit based," Kroutil said. "The higher the risk, the higher the rate."

Kroutil said Commerce offers customer discounts based on their relationship with the bank.

Binns stated that the banking relationship at Empire is not a factor in rate, although it can be a factor in the decision to make the loan.