The mortgage refinance boom is ending on Long Island as in the nation, a change that will take some wind out of the sails of a modest economic recovery.
Since early May, the interest rate on a typical 30-year mortgage rate has risen almost one percentage point, to 4.32 percent, according to mortgage finance giant Freddie Mac.
That rise has choked off banks’ refinancing business by reducing the money homeowners save by paying off their old mortgage with a new, lower-rate deal.
What that means, in turn, is that fewer homeowners have a boost in discretionary income that they might spend on things like home improvements, gasoline, college costs or paying down debt.
While it’s hard to calculate how much of a boost such refinancing gave to Long Island, it appears considerable.
At Bethpage Federal Credit Union, one of the Island’s largest mortgage lenders, president and chief executive Kirk Kordeleski estimates that his refinance customers saved a total of about $56 million in interest from 2009 through 2012.
Add that to the savings won by refinancing customers of others lenders such as Wells Fargo and Chase, he said, and “a lot of money went into people’s pockets to help the Long Island economy during that time.”
Lower payments
Bill consolidation and lower monthly mortgage payments were key drivers of the refinance boom.
Dan and Lisa Donoghu, of Fort Salonga, accomplished both when they refinanced in May through Lynx Mortgage Bank LLC in Westbury. Their interest rate went down from about 3.88 percent to 3.5 percent, they lengthened their term from 15 years to 20 and took cash out.
“My two boys are in college and my daughter got married in August, so I had some big bills I wanted to take care of,” said Dan, 51, a New York City Fire Department deputy chief in Manhattan and a registered nurse at Brookhaven Memorial Hospital Medical Center in Patchogue.
The couple — Lisa is also a nurse — bought their house in June 2001 with a 30-year mortgage at about 7 percent and had refinanced twice before, Dan said. They got lower rates and shortened the term to 15 years. “After my younger son gets out of college in three years, then we’ll have the option of prepaying to get us back to where we’re hoping to be — retiring without a mortgage,” he said.
Nationally, the Mortgage Bankers Association trade group in Washington says refinancing nationwide fell 18 percent from $388 billion in the fourth quarter of last year to $316 billion in this year’s second quarter and is forecast to fall by another 40 percent from the second quarter to the current, third, quarter.
The boom was great while it lasted.
http://www.newsday.com/business/climbing-interest-rate-slows-refinance-boom-1.6155561