SIKESTON -- "Busy, busy!" was the phrase loan originator Michele Knickman used to describe her current working conditions as 30-year mortgage rates plunged to a 32-year low last week, resetting the record from two weeks ago.
"People who are refinancing their older mortgages are having phenomenal savings," said Knickman, who works at U.S. Bank. "Some people are worried about the closing costs, but in the end, there are long-term benefits."
Knickman said she had a couple who refinanced their mortgage from a 13 percent rate to 6 percent Friday.
Freddie Mac, the mortgage company, reported Thursday that the average interest rate on a 30-year fixed-rate mortgage dropped to 6.31 percent, the lowest level since the company began its nationwide survey in April 1971. Two weeks ago, rates on 30-year mortgages averaged 6.43 percent.
A year ago at this time, 30-year mortgages averaged 7 percent.
Even though rates have dropped considerably over the last couple weeks, Knickman said consumers have inquired about mortgage rates for about two years now, although business has picked up recently, she said.
Several area bank personnel share the same sentiment as Knickman. Matt Wright, vice president of First Security State Bank, said phone calls have increased dramatically over the last few weeks. "Rates have been attractive all summer long," Wright said. "With rates that low, homebuyers can afford more house for the cost."
Savings or extra cash coming out of refinancing deals is helping to support consumer spending and offset some potentially negative factors, such as volatile stock market and eroding consumer confidence.
Wright added that with low mortgage rates, more homeownership will take place and can make a community more stable. "These low mortgage rates have multiple effects," he said.
The average interest rate on 15-year mortgage rates, a popular option for refinancing, dipped to 5.69 percent last week, the lowest level since Freddie Mac began tracking these rates in August 1991. That compared with the rate of 5.84 percent two weeks ago. A year ago, 15-year mortgages averaged 6.54 percent.
Knickman cited an example of the savings of a 15-year mortgage of $100,000. If someone had a $100,000 mortgage with 8 percent versus a $100,000 mortgage with the current 5.69 percent, payments would decrease from approximately $955 per month to $843 per month, she said. Those with a 30-year mortgage of $100,000 will also save over $100 per month with the current rates, she added.
Another hot topic in the financial world is adjustable-rate mortgages, or ARMS. "They're looking very attractive right now, especially for those who don't need long-term finance," Knickman said.
On one-year ARMS, lenders were asking an average initial rate of 4.37 percent, down from 4.45 percent the previous week. Last year this time, one-year ARMS averaged 5.7 percent. These rates do not include add-on fees known as points. Each loan type carried an average .6 point last week.
Mortgage lender Charlette Vanover of First National Bank has an explanation for the recent mortgage rate decreases. "I really think a lot of it goes back to Sept. 11," she said. "Sept. 11 had such a volatile effect on our economy. It's completely unpredictable what will happen next."
Knickman said she can't imagine a major increase of mortgage rates in the near future.
Wright said no one can forecast the future. "We encourage the public looking to refinance or purchase a home to consider acting now."
Vanover said she also hopes people realize the timing is right. "In the past people held out on low rates because they didn't want to miss out on a better opportunity. Now, they need to take advantage of it."
The Associated Press contributed to this story.