It seems that Europe’s financial crisis is converting to low mortgage rates for US borrowers looking to refinance their first or second mortgage.  Homeowners seeking a low rate mortgage refinancing are in the right place at the right time if they have the credit, income and equity in their home to qualify: Mortgage rates are inching closer to a record low.  The window of opportunity may close soon. Refinance rates could jump if investors grow more confident and shift money out of the safety of government bonds, which influence mortgage interest rates.  For now, though, mortgage refinance rates are ridiculously low. The average thirty-year fixed-rate loan sank to 4.78% last week, the lowest this year and barely above the record of 4.71% set in December. And fifteen-year loans are at their lowest rates in twenty years. 

According to the Mortgage Bankers Association, mortgage refinance applications soared last week to the highest level in seven months.  Anxiety over the European crisis has caused global investors to snap up Treasury bonds, which they view as much safer than other investments. Treasury yields have fallen as a result, taking mortgage refinance rates down, too.  When the crisis eases, and especially if the American economy recovery stays on track, expect investors to move out of bonds and back into stocks. That would make refinance mortgages more expensive.  “If the economy finally really shows sustained improvement, rates are definitely going to go up,” said Fred Chamberlin, a consultant with Alpine Mortgage Planning in Eugene, Ore.  He suggests that homeowners looking to refinance move fast and not hold out for even lower rates. “If you want the bottom, the only way you’re going to know it is when you’ve missed it,” Chamberlin said.

Home refinancing isn’t right for everyone who qualifies. In most cases, mortgage refinance loans cost several thousand dollars in fees.   No cost mortgage refinancing may be available but usually the interest rates are higher, so in the end you may not save as much money as you would have you paid the lending closing costs.  Experienced mortgage lenders recommend calculating how long it will take to recover those fees with the lower loan rate.  As cheap as mortgages are these days, the number of loans being taken out to buy homes remains at its lowest point in more than 13 years. One reason is that a special tax credit for homebuyers expired last month. Many people had rushed to sign contracts by then.  Another problem millions of homeowners are having is qualifying for a refinance mortgage. Borrowers need solid credit and a down payment of at least 3.5%.

Banks tightened mortgage refinance guidelines after millions of borrowers fell into default and foreclosure during the housing bust.  A loan officer with Icon Mortgage in Las Vegas said, “They’re really looking with a magnifying glass,” said Steve Mevorah,. “They’re trying to make sure that they are flawless loans.”   Analysts had expected mortgage rates to rise when the government ended a program designed to bolster the housing market. Instead, they fell because of fears that Greece would default on its debt.