Refinancing Surges on Low Rates

Sharply lower interest rates gave U.S. mortgage refinancing its biggest boost in over a year last week, as homeowners who may have missed out on last summer’s record low rates rushed to refinance, a report said Wednesday.

The Mortgage Bankers Assn., a Washington trade group, said weekly refinancing activity posted its biggest weekly increase in a little more than a year and reached its highest level in nearly eight months.

The group’s mortgage refinancing index for the week ended March 12 surged by 39.7% to 4,983.7, at the high end of analyst forecasts.

“We have been expecting a sharp uptick in refinance applications as borrowers became more aware of the low rates now available,” said Jay Brinkmann, the group’s vice president of research and economics.

A resurgence in mortgage refinancing will buoy consumers, who are facing a tough labor market, by lowering monthly payments. Money from cash-out refinancings also is expected to drive consumer spending and bolster the overall U.S. economy.

U.S. homeowners converted an estimated $130 billion of their home equity into cash in 2003, according to Freddie Mac.

Last week’s mortgage rates averaged slightly higher than previous weeks’ levels, but borrowers who filed their applications last week were not discouraged by the slight increase in the rates.

Average interest rates on 30-year mortgages, excluding fees, rose 3 basis points to 5.37% but are still 24 basis points lower than the comparable week a year earlier.