A remortgaging boom is sweeping across USA property
USA property is getting a much needed boost as a mortgage refinancing boom sweeps through parts of the US ravaged by the housing crisis, offering relief to strained household balance sheets.
Interest rates have moved steadily lower over the past 18 months, allowing more people to take advantage of better borrowing rates on their USA property loans.
According to Freddie Mac, the government-backed mortgage company, the average 30-year fixed mortgage rate was 3.49 per cent this week, compared with 4.55 per cent in July 2011 and 5.05 per cent in January 2009.
For those who succeeded in refinancing, this has translated into average savings of about $2,500 to $3,000 a year on mortgage payments.
“To be able to refinance is just like getting a tax cut,” says Mark Zandi, a senior economist at Moody’s. “It’s a very effective kind of tax cut that goes to high-to-middle-income households, and in many cases that money will be put to pretty good use [and pumped back into the economy].”
Mortgage refinancing applications jumped 134.5 per cent between June 2011 and June 2012, with states that suffered the most as a result of the housing crash witnessing the biggest gains, according to data from the Mortgage Bankers Association.
Refinancing applications for property in Nevada jumped 368.8 per cent in the year to June, and 247 per cent for property in Florida.
The reason behind the surge in the hardest-hit states is that they have the biggest shares of homeowners “underwater” with their mortgages – meaning the home loan is worth more than their house and they are stuck with “negative equity”.
It is likely that the USA property refinancing boom will continue, although there is some concern that lenders may already be at full capacity in terms of processing the applications. Mortgage rates could well continue to drop, particularly if the Federal Reserve decides to engage in more easing of monetary policy. (Source: FT.com)
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