| Fed's rate cuts ignite a rush to refinance
A positive note in the chorus of bad economic news sounds loudly, like a call to arms. Or, as happened after the Federal Reserve dropped short-term interest rates three-quarters of a percentage point Tuesday, a race to refinance. The refinancing frenzy began right after the Fed's announcement, local brokers and bankers reported. The 10-year Treasury bond rates on which fixed mortgages are based also fell, and interest rates for 30-year loans plunged as far as 5.125 percent, the lowest level since spring 2004. On Jan. 1, the 30-year fixed rate averaged 6.07 percent; it has ranged between 6 percent and 6.5 percent for two years. Though the number of refinancing applications will not be available until Wednesday from the Mortgage Bankers Association, newspaper and television accounts from Bangor, Maine, to Los Angeles described a boom in activity.
Homeowners scurrying to refinance
Paige O'Mahoney spent the past several months watching interest rates as she considered whether to refinance her mortgage to save money. She hit the jackpot last week when a drop in rates allowed her to refinance sooner than her family had expected. O'Mahoney is among a growing number of consumers who are taking advantage of fixed-rate loan offers that have sunk to their lowest levels since 2004. The average rate on a 30-year fixed-rate mortgage fell to 5.48 percent yesterday, down from 5.69 percent the week before, according to Freddie Mac's weekly survey. Declining rates are further evidence of weakness in the housing market and follow this week's emergency rate cut by the Federal Reserve, said Frank Nothaft, Freddie Mac's chief economist, in a statement yesterday.
RAMS smashed despite Westpac buy
Westpac Bank will take over the future business of RAMS Home Loans Group, swooping on the assets of the lender which struggled to refinance its debt following the US subprime mortgage crisis. RAMS shares tumbled as much as 22 per cent today after Westpac, Australia's fourth-largest bank, said it would buy the RAMS franchise and brand for $140 million and refinance some of its debt, but not take on its existing mortgage book. The deal was hailed as a cheap buy for Westpac which is seeking to expand its mortgages arm, but will leave RAMS as an operation with no new business from November that will service only existing loans. "RAMS looks like a business in run-down, it doesn't have much of a future at all,'' said Argo Investments Managing Director Rob Patterson.
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