Other business
Lower rates set off boom in mortgage refinancing

By John Duchemin
Advertiser Staff Writer

Hawai'i mortgage rates, already at yearly lows, went down again last week, and lenders say customers have poured in to refinance their loans and save hundreds of dollars a month.

The average annual percentage rate for a new 30-year mortgage in Hawai'i dropped to 6.42 percent last week — compared to 6.56 percent the week before, and 7.77 percent one year ago, according to a Honolulu Advertiser analysis of Honolulu Board of Realtors data.

For 15-year mortgages, the average rate was 6.03 percent this week, down from 6.14 percent the week before and 7.51 percent in 2000. Many lenders are offering 15-year rates below 6 percent.

The lower rates mean significant savings for borrowers in Hawai'i. A $300,000 30-year mortgage at 6.42 percent costs $1,880 per month; at 7.77 percent — the average rate last year — that mortgage costs $273 more per month.

A 15-year mortgage at 6.03 percent costs $2,536 per month; at last year's 7.51 percent, the cost is $246 more.

Interest rates have plunged since the Sept. 11 terrorist attacks jolted the nation. Already at a low ebb this past summer, mortgage rates nationwide have dropped to three-year lows in response to changes in the long-term bond market — to which mortgages are pegged — which has thrived as investors seek "safe" money during uncertain times. A higher bond market generally means long-term interest rates, like mortgages, will drop.

Hawai'i homeowners are certainly taking advantage of the lower rates, said Daniel Grounds, a broker with family-run Aina Mortgage in Niu Valley.

"Since the terrorist action, unfortunately we've been doing quite well, especially in refinancing," Grounds said. Business has increased to at least twice the normal volume in the latter half of September, Grounds said.

Nationally, mortgage refinancing applications have spiked to their highest level all year. The Mortgage Bankers Association of America says its index that measures refinancing activity hit 3,460 for the week ending Sept. 28, up 74 percent since the terrorist attacks.

It was the second most active refinancing week in the 12 years MBAA has tracked it. Applications for home purchase mortgages increased last week, too, the association says.

Also, the national average interest rate on 30-year fixed-rate mortgages fell to 6.64 percent, down from 6.72 percent last week, according to the nationwide survey released Thursday by Freddie Mac, the mortgage company.

It marked the eighth week in a row that 30-year mortgages have been under 7 percent. This week's rate marked the lowest level for 30-year mortgages since they averaged 6.49 percent the week of Oct. 9, 1998.

Fifteen-year mortgages, a popular option for refinancing, slipped to 6.11 percent this week, compared with 6.23 percent the previous week, and was the lowest level since Freddie Mac began tracking the rates in 1991.

A year ago, rates for 30-year mortgages averaged 7.83 percent and rates for 15-year mortgages averaged 7.50 percent.

Advertiser news services contributed to this report.