Mortgage refis surge
By Holden Lewis • Bankrate.com

Mortgage rates went up this week from near-record lows as brokers and bankers scrambled to keep up with an influx of applications.

The benchmark 30-year fixed-rate mortgage rose 42 basis points, to 5.84 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.39 discount and origination points. One year ago, the mortgage index was 6.31 percent; four weeks ago, it was 5.97 percent.

The benchmark 15-year fixed-rate mortgage rose 16 basis points, to 5.46 percent. The benchmark 5/1 adjustable-rate mortgage rose 11 basis points, to 5.95 percent.

Weekly national mortgage survey

Results of Bankrate.com's Dec. 24, 2008, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

Bankrate's benchmark rate is an average of what lenders are offering, and not necessarily of what borrowers are accepting. It appears that this week's benchmark average was inflated when some banks dramatically increased rates to "throttle volume," in the words of one broker. When lenders are deluged with loan applications, they sometimes raise rates until they catch up on the work.

Take the example of two banks in Chicago. On Dec. 17, Chase Bank in Chicago quoted a rate of 5.5 percent on a 30-year fixed. A week later, it was quoting a rate of 7.25 percent. That's no reason for a Chicago rate-shopper to despair; First Savings Bank of Hegewisch reduced the rate on its 30-year fixed by half a percentage point, to 5 percent.

Almost no one is getting an ARM nowadays. Adjustable-rate mortgages accounted for 1 in 125 loan applications last week, according to the Mortgage Bankers Association. Not only are initial rates on ARMs higher than those on fixed-rate mortgages, borrowers are wary of getting loans with rates that could rise in the future.

Last week's surge in mortgage applications came mostly from homeowners who wanted to refinance their home loans. According to the MBA, overall applications were up 48 percent last week as refi applications grew almost 63 percent and purchase applications rose about 11 percent.

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This refi boomlet isn't on the scale of the long boom of 2003 and 2004, when almost everyone with a mortgage refinanced, and a lot of people refinanced more than once. But now there are fewer people in the mortgage business -- and, therefore, fewer people to accept applications and process the loan paperwork.

As loan applications pile up on brokers' and loan officers' desks, it becomes important to make sure that your application gets moved along instead of languishing near the bottom of the stack of papers. That makes it important to get the paperwork in as quickly as possible. If the lender wants tax returns, deliver them fast. Cooperate with the appraiser by returning phone calls and being flexible with your schedule.