More people seen refinancing as mortgage rates drop

(WWLP) – Rates are still uncomfortably high for many potential homebuyers and sellers, but recent declines have helped boost refinancing demand. 22News explores the reasons behind this trend.

There’s been a full point drop in mortgage rates in the last three weeks, going from 7.5 percent to 6.5 percent. “We certainly haven’t seen that in several years,” said Owner of ERA Laplante Real Estate in South Hadley, Steven Laplante.

According to Mortgage Bankers Association, it has led to a 35 percent spike in refinance applications last week. This is so they can reduce their monthly payment.

“People are in the process of refinancing if you have an 8 percent rate or an 8 and half percent rate to refinance down to 6 and half percent is going to be a huge monthly savings,” said Laplante.

If people do decide to refinance their home loans at a lower rate they can save nearly $200 dollars, according to Laplante. Homeowners are also looking to get rid of their private mortgage insurance, which protects lenders from losses.

“If you refinance and the appraisal shows you havie at least 20 percent equity, not only do you get the monthly savings and the mortage but you could also drop PMI,” added Laplante.

This could mean an additional hundred dollar savings. Other reasons people do refinances is to pay off other debts like credit cards.

“People if they pay only the minimum they don’t really get out of the whole so people are really looking to use the mortage to refinance for that purpose even if they aren’t going to go out an buy a new house,” said AIC’s Professor of Economics and Finance, John Rogers.

But rates are still more than double than what they were nearly 4 years ago. Experts say, if people are patient, they’ll see lower rates, and more benefits.

Rogers believes this will loosen up the housing market. It’s anticipated that the fed will cut interest rates in September. This could lead mortgage rates to fall to 5 percent in the next couple of years.

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