By Jeff McKinney
The Cincinnati Enquirer
For home lenders such as Robert Bollin, business has taken a huge turn since interest rates skyrocketed in recent weeks.
In fact, the more-than-a-percentage-point rise in mortgage rates the past two months has prompted Fannie Mae to cut its projections for mortgage originations to about $3.4 trillion for this year. That figure is still a record high, but it's down from a June estimate of $3.7 trillion by Fannie Mae, the nation's largest financer of home loans.
What triggered the downward forecast? The rising rates have put the brakes on the refinancing business.
David Berson, chief economist for Fannie Mae, also cut his forecast for 2004 originations to about $1.5 trillion from $2 trillion, attributing the whole decline to less refinancing. That activity next year is expected to plunge to $400 billion, the lowest figure since 2000.
For Bollin, president of Winton Savings and Loan Co., one of Greater Cincinnati's largest mortgage lenders, the downward forecast is on target.
He says mortgage applications for refinancing and home purchases at Winton are down 85 percent since early July. That was about a week after Federal Reserve chairman Alan Greenspan expressed optimism about a stronger economy and sent mortgage rates soaring.
The average rate on a 30-year, fixed-rate mortgage locally was 6.24 percent this past week, up from a record-low 5.21 percent June 16, the Cincinnati Area Board of Realtors says.
Bollin, whose Winton Savings already has done $500 million in mortgages this year, says what's happening now is refinancing demand has halted.
"The rising rates have stopped the refis, as apparently a lot of people are feeling sticker stock from the big jump in rates," Bollin said. But people are still doing some purchases, with many trying to get loans before mortgage rates move higher.
From a consumer viewpoint, believe it or not, the higher rates could bring good results.
The reduced volume could cut the risk of a consumer losing a 30-day lock-in on the interest rate as well as speed up the mortgage closing process.
LOCAL BUSINESS HEADLINES
Turn in weather salvaging tourism
Decorating dorms is big deal
Rates up, so loans down
Business Meetings This Week
Commercial Real Estate Projects & Transfers
SMALL BUSINESS HEADLINES
Ex-player turns baseball into Web business
Diabetic Olympian starts medical ID company
Think big to spur big growth
NATIONAL BUSINESS HEADLINES
Car's power windows called danger to kids
Police focus on tired truckers