Home lender Countrywide Credit Industries Inc. on Thursday said fiscal first-quarter earnings rose 47% as low interest rates spurred consumers to refinance their mortgages.
The Calabasas-based company also said it expects fiscal second-quarter earnings to exceed analysts' estimates. Countrywide's shares rose $2.62 to $44.30 on the New York Stock Exchange.
"We think this refinance boom still has more legs to it. We anticipate it's going to go on for at least another two quarters," said Angelo Mozilo, chairman, president and chief executive.
Countrywide posted net income for the quarter ended May 31 of $123.1 million, or $1 per share, compared with $83.5 million, or 72 cents, a year-earlier. The results exceeded estimates of 98 cents a share, according to a survey of analysts by First Call/Thomson Financial.
The company estimated it would earn $1.15 to $1.20 a share in its second quarter, compared with $1.01 expected by analysts.
Homeowners are refinancing to take advantage of mortgage rates more than a percentage point lower than last year, when the average rate on a 30-year mortgage hit a five-year high of 8.52% in May, according to Freddie Mac, the second-largest buyer of U.S. mortgages. The average rate bottomed at 6.95% in March, and crept up to 7.08% in April.
"We're past the peak of the refinancing boom, but we expect that demand will stay strong for the rest of this year because we're seeing a lot of folks doing equity cash-outs to clean up their credit cards," said Douglas Duncan, chief economist at Mortgage Bankers Assn. of America.
During the first three months of this year, half of the U.S. borrowers who refinanced did so to raise cash and the rest used the loans to lower monthly payments, Duncan said.
For 18 consecutive weeks ending in April, more than 50% of U.S. mortgage applications were for refinancing loans. That compares with 24 consecutive weeks in 1998 during the last boom, when a record $1.51 trillion of loans were made, Duncan said. Last week, 44% of mortgage applications were for refinancing, he said.
A strong housing market is keeping demand high for purchase loans. The National Assn. of Realtors said earlier this month that sales of new homes this year will set a record, rising 3.1% to 904,000, and sales of existing homes will rise 0.9% to 5.16 million, landing just short of the record set in 1999.