Michael Bower's team at The Mortgage Company in Allentown, Pa., is busy making calls and blasting emails to spread the word: It's a good time to refinance.
Perfect, even.
"It's been tough to find time to call all the customers that fall into that bucket," he said. "Because there are a ton."
By his standard, that bucket includes any homeowner who could save at least 0.75%-1% on their mortgage rate by refinancing now and have the refinancing pay for itself in a year or two. That includes almost everybody who bought a home in the last year and a half -- credit qualifications withstanding.
Since the Federal Reserve cut the benchmark interest rate in late July -- the first cut since the Great Recession -- the mortgage refinance market has seen a marked surge, though experts say it's not a clean cause-effect relationship.
Mortgage rates have been falling all year. The headline-grabbing federal rate cut simply caught homeowners' attention and sent many running to their lenders.
"The 2019 refinance wave continued" throughout the nation into August, according to the Mortgage Bankers Association, which reported a 21.7% increase in mortgage applications in the first week after the Fed's cut. Refinance requests made up 61.4% of those applications, up from 53.9% the week before.
The average 30-year fixed-rate mortgage in the U.S. is hovering around 3.6%, according to the Federal Reserve Bank of St. Louis. A year ago, it was a full percentage point higher.
Add in rapidly appreciating home prices and high turnover of sales, and the local conditions are just right.
"It's a perfect storm for refi," said Leonard Tabone, a mortgage banker with Quaint Oak Mortgage in Allentown.
The latest news has created enough thunder for people to simply realize what's going on, local lenders say. Tabone likened this phenomenon to depleting daylight at the end of summer: It slowly gets a little darker a little earlier every night, but one might not notice day-to-day.
In reality, the federal rate cut had already been built into the market in anticipation of the announcement, Bowers said. Plus, fixed mortgage rates, which are long-term rates, are not actually determined by the federal funds rate, which is the short-term rate for bank-to-bank lending and has a greater effect on things like credit cards.
Regardless, now that people have noticed, refinance activity is booming.
"By the end of the year, Tabone predicts, his refinance volume will have doubled last year's amount.
"Even people that bought a house eight or nine months ago are already looking at refinancing," he said.
Since that late July Fed cut, Bowers said, The Mortgage Company has had a significant bump in refinance applications, despite that not being its primary focus. Compared with six months ago, he said, refinance applications are up 400%.
The applications are largely coming from clients who bought houses when interest rates were in the 5s or 4s -- which was the case throughout 2018.
Before that, rates were not much higher than today's. But the drop from almost 5% in November 2018 to 3.6% in August is more than enough to make an impact.
It's not just The Mortgage Company seeing the bump. The public interest in getting a lower rate has turned other purchase lenders into refinance lenders.
Ralph Trinidad opened United Solutions Mortgage Group in July 2018 to sell mortgages to new homeowners. This summer, he started receiving requests for refinance applications, many from his earliest clients.
One of his clients underwent a cash-out refinance, taking out $58,000 from his home equity to remodel his kitchen. But with the new rate in effect, his monthly payments stayed the same.
The reasons to refinance vary. Some are taking advantage of the low rates to consolidate high-interest credit cards, get rid of their private mortgage insurance, take out equity to build home additions or shorten the life of the loan.
"It's not just, 'Hey, I want a lower payment,'" Tabone said.
Bowers said he's seeing people reduce their terms from a 30-year to a 15-year loan without a big impact on their monthly payments, but the effect is they will save tens of thousands of dollars over the life of the loan.
Homes in the area have certainly appreciated enough to feed a healthy refinance market. In two years, from July 2017 to this July, the median sales price of a Lehigh Valley home rose nearly 17%, according to reports from the Greater Lehigh Valley Realtors Group.
Because of this built-up equity, local lenders are also noticing more buyers qualifying for home appraisal waivers, reducing the cost of the refinance.
"We have clients refinancing and not spending a dime on appraisal," Tabone said.
The process isn't always a long one either, Trinidad said. The process for a recent client, from submission to closure, took one week. On the long end, it might take 30 days, he said.
"There are some misnomers about refinancing," he said. "People think it can be a long tedious process and involve a lot of money."
Local lenders say the average cost of a refinance could be anywhere between 1% to 2% of the remaining loan balance, though Trinidad cautions that every transaction is different. Homeowners with loans backed by government agencies such as the Federal Housing Administration or Veterans Affairs can look into streamlined processes that reduce the amount of underwriting and paperwork necessary to submit a refinance.
The low mortgage rates spell better news for housing affordability, measures of which are down to mid-Recession rates. With much at stake, Tabone advises against playing the "rate game" -- seeing how long this can last.
"We've got to move forward and lock it," he said. "Does it work for you? Yes? OK."
