NASHVILLE, Tenn. (WKRN) – COVID-19 continues to raise concerns about the economy and a lot of people are turning to refinance because of low rates.
According to CAPSTAR BANK’s David Menke, they’ve seen a surge in customers wanting to refinance their mortgages.
“Mortgage rates started to go low when this all started to rear its ugly head in China towards the end of the month in February,” said Menke. “Then we saw a huge influx of business that’s now in our pipeline. That sent us into this mini refi boom now with just everybody wanting to refinance.”
Menke, who’s also board president for the Nashville Mortgage Bankers Association, said these changes in the Nashville area happened before the Federal Reserve cut interest rates to 0%.
“The Federal Fund rate, which is the rate at which the feds lend money to banks, is not directly correlated with mortgage rates. There’s a lot of misconceptions out there when people see rates go to zero they think they can get a zero percent interest rate on their mortgage which isn’t always true but we try to do as much education about that as we can when we get those phone calls,” Menke said. “At the end of the day the banks will move but it’s not in lockstep with the feds.”
According to Menke, the federal rate cut does present a viable opportunity for homeowners wanting to refinance.
“When you refinance you generally skip a mortgage payment or two. Some people are pursuing refinancing for that reason. It could be a multitude of things,” said Menke. “But it’s mostly for the lower interest rate because rates being in the lower three percent for a 30-year mortgage there’s a lot of opportunities out there to lower payment.”
Still, Menke said there is a lot of volatility within the market that homeowners should also keep in mind.
“It’s definitely become more challenging – the volatility with interest rates specifically right now is something you need to watch. I’m having our loan officers quote a range of rates because from the time we’re speaking now to later in the day a rate could change 1%,” Menke said.
He said that translates to hundreds of dollars for a mortgage transaction so folks are encouraged to lock their rate if they’re happy with it.
Job security is also a factor that property owners should keep in mind. Menke said in the last couple weeks, banks are becoming more aware that people are losing their jobs so they’re doing verification of employment at closing.