> Advice For Borrowers
Refinancing Consumers Could Gain Negotiating Edge
by Broderick Perkins
Only 8 percent of homeowners plan to refinance their mortgage in 2004, and given that some of them will visit lenders, brokers may be scrambling for their business. The latest Cambridge Consumer Credit Index says the number of consumers who plan to refinance this year is down 50 percent from two years ago. Another recent study, "Gray Skies or Sunshine? 2004 State of the Mortgage Industry: A Broker Survey," reveals brokers may be looking through rose-colored glasses at those borrowers. "Gray Skies" found no silver lining in the surprising number of brokers who plan to continue to focus on the refinance market, even after predictions of higher interest rates, which typically turn off refinance demand. "An interesting outcome of our study was learning of the attention brokers still plan to pay to the refinance market in 2004. Eighty-three percent of participating brokers said that they would be spending some of their energy on refinancing activities. Of those brokers, 30 percent said that refinancing would consume 50 percent or more of their business efforts," according to a report. The credit index is a survey of more than 1,000 households nationwide conducted by International Communications Research. Informative Research collected 86 questionnaires from mortgage brokers earlier this year for the "Gray Skies" study. Of those surveyed for the credit index, 35 percent have refinanced in the past two years, up from 24 percent in 2002. The survey said 57 percent of Americans have not refinanced and have no intentions to do so, down slightly from 60 percent in 2002. When asked what they planned to do with money saved from refinancing, 30 percent planned to use the money to pay off non-credit card debt such as car and student loans, up from 23 percent in October 2002; 23 percent (down from 31 percent) of the respondents planned to increase their savings; 22 percent (up from 20 percent) planned to spend the money on home improvements, cars or other major purchases; 10 percent (down from 15 percent) expected to use the proceeds to pay off credit card debt and 15 percent (up from 11 percent) planned to use the money in other ways. "The results of the Cambridge Consumer Credit Index wildcard question show clearly that the refinancing boom which gave consumers billions of dollars in additional spending power is rapidly waning," said Jordan Goodman, spokesman for the index. That could be at loggerheads with brokers's hopes. According to the broker study, although 45 percent of brokers said that they plan to change the mix of products they offer consumers this year, almost half of the brokers plan to resume marketing refinance loans. Forty-eight percent of the brokers polled had no plans to change the mix of loan products they offered this year, because they believe that they already have the best loan products available and that no new products have been developed they needed to add to their portfolio. Hopefully, that includes the cheapest refinance mortgage. That's likely what the relatively fewer refinancing homeowners will demand. | 
