New Orleans

As interest rates climb, refinancing slows in metro area – New Orleans, Louisiana

New Orleans, Louisiana 2022-05-20 07:49:26 –

Lenders in the New Orleans region are beginning to see a slowdown in refinancing activity as local markets reflect the national trend of rising interest rates.

Coleena Zimet, Senior Loan Officer at NOLA Lending Group, said the record low interest rates over the last two years mean that refinancing accounts for about 50% of her business. Recently, it’s 25% refinancing and 75% new mortgage applications.

“The pipeline of refinancing applications is definitely getting smaller,” says Zimet. “High interest rates on mortgages don’t make sense economically, so homeowners aren’t currently refinancing to save money. Instead, if they’re refinancing , Obtaining cash equity, transferring ownership, and consolidating debt are more purposeful, intentional, and strategic. “

In December 2021, refinancing accounted for 64% of all mortgage applications, but by April 2022, that percentage dropped to 36. Refinancing applications have decreased by 57% since December and 68% since 2021. Data provided by the Mortgage Bankers Association.. The MBA forecasts refinancing mortgages from 6.4 million in 2021 to approximately 2.23 million in 2022.

Nationwide, there were 1.81 million mortgages rolled over to new mortgages in the fourth quarter of 2021, down 11% from the third quarter and 23% year-on-year. ATTOM’s Q4 2021 Mortgage Composition Report.. The dollar amount of refinancing loans decreased by 9% from the third quarter of 2021 to $ 578 billion each year by 18%.

The current average interest rate for 30-year refinancing is 5.35%, while for 15-year refinancing it is 4.71%. According to Bankrate.. At the start of the COVID-19 pandemic, the refinancing rate dropped to a historic low of nearly 2.8%, but is now centered around pre-pandemic levels.

“The rise in mortgage rates as a result of economic inflation has put refinancing at an economic disadvantage. Raising discount rates to combat inflation is a historical guide to federal reserves, and inflationary pressures When the economy calms down, interest rates should fall again and encourage refinancing activities, “said Wilgandy, branch manager of New Orleans’ cross-country mortgages. ..

But Gandhi said the market isn’t heading towards the end of 2007, when mortgages became the default.

“In today’s market, we’re not close to that. Lenders have a well-understood portfolio of mortgages, and the housing market is experiencing strong demand,” Gandhi said. “Looking at the history of when we were in an inflationary environment, hard assets like real estate are still a big investment because of the high prices. Buy that asset now and at a later date interest rates in past cycles You can refinance when you go down. “

Last month, the NOLA Lending Group introduced a special portfolio loan for customers looking to offset the market situation and counter rising mortgage rates. For 7/1 floating rate mortgages (ARMs), interest rates are fixed for 7 years and then changed annually for the remaining 23 years of the mortgage. Unlike traditional 15-year or 30-year mortgage rates, ARM allows you to fix at a low interest rate for several years before the borrower adjusts.

According to Jimmet, these niche loans are of interest to second-home buyers and investors who use banks with low payments during the introduction period to refinance or refinance real estate from loans before interest rates mature. May be sold.

“When it comes to mortgage lending, there’s more than one shoe that suits everyone, but we want to provide people with solutions and alternatives in all types of markets. For the rest of the year, special portfolio loans will be new. It could be a trend, “said Jimmet.

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