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With Interest Rates Down, Refinancings Up In Bay Area

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By KRISTA KLAUS | News Channel 8

Published: December 22, 2008

It's one pre-holiday sale in an otherwise dismal season that appears to be working.

Mortgage interest rates are at a 58-year low, and according to Fifth Third Bank, homeowners are applying for new loans at near-record levels.

"Mortgage applications are at their highest levels since 2003," said Carmen Inclan, mortgage broker for Fifth Third.

Inclan said refinance inquiries are up 800 percent this month over November, while loans in process are up 400 percent. Demand is so strong, the bank is hiring temporary workers to handle all the requests.

Interest rates are hovering at about 4 3/4 percent for a 15-year fixed loan, and 5 percent for a 30-year fixed loan.

But while the mortgage industry is holding its breath for a housing recovery, not everybody can take advantage of the lowest mortgage rates in more than a generation. According to financial experts, you need to have at least 20 percent equity in your home, and standards are much stricter than in the past.

"You need to prove the capacity to pay the mortgage; that means you gotta have an income. So if you're recently unemployed, unfortunately you won't be able to refinance," said Carmen Wong-Ulrich, finance analyst for CNBC.

For Bay area property appraiser Bruce Wright, business is up about 20 percent since rates began sliding, but he laments that many are upside down in their houses.

"If people bought before 2003 and they didn't refinance during the run-up from '01 to '05, then the equity is potentially there to do a refinance," Wright said while appraising a South Tampa home today. "If that's when they brought their house and they refinanced during that period and maxed it out, the values just aren't there."

Traci Powell of Tampa did not get caught up in the refinance boom, and she is getting her paperwork together to take advantage of the low rates. She said she's hoping to reduce her monthly payments by between $300 and $400.

"They're the lowest rates in my lifetime of being able to be a homeowner, and this is a home I want to stay in for a little while," she said.

Inclan of Fifth Third called the rates "an opportunity like no other."

But while the low interest rates are encouraging, they're not a magic bullet.

Inclan says one in three people who want to refinance are turned away because they don't have enough equity in their homes.

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