The tables have really turned in the past couple years in terms of why American homeowners are refinancing. During the height of the housing boom, homeowners were borrowing against their equity like crazy, as their home values appeared to be headed quickly upward indefinitely.

Now, however, Americans are house poor and many are and have been at the mercy of high adjustable interest rates. In the most recent study from mortgage finance giant Freddie Mac, it looks like homeowners are overwhelmingly using refinance loans to lower those rates and cut their monthly payments.

Freddie Mac reported that in the third quarter of 2009, refinanced loans netted up to a total $3 billion in payment savings for the first year of the new mortgages for participating homeowners. One half of all those who refinanced conventional mortgages lowered their annual mortgage interest rate by 17 percent or more!

“Homeowners are benefiting from an extended period of very low interest rates. In the first nine months of 2009, interest rates on 30-year fixed-rate mortgages have averaged 5.1, the lowest such average in the 38-year history of Freddie Mac’s Primary Mortgage Market Survey,” noted Frank Nothaft, Freddie Mac vice president and chief economist. “At the beginning of the year, only borrowers who still had a solid equity cushion could take advantage of the low mortgage rates, but through the Homeownership Affordability Refinance Program that got underway in April, borrowers who have a loan owned by Freddie Mac or Fannie Mae can refinance that loan even if they have no home equity. As of August 31st, over 93,000 borrowers had taken advantage of this opportunity according to the Federal Housing Finance Agency, with the bulk of those occurring in July and August.”

And 64 percent of prime (good credit) borrowers who refinanced conventional loans in the third quarter retained the same principal balance or actually reduced it. That is the highest recorded percentage in six years. Only 36 percent of borrowers refinanced with “cash-out” loans. In total they pulled out $20 billion of home equity, the lowest amount in almost a decade.

Bottom line: If you can qualify, refinance now for payment savings. Interest rates are likely to rise starting sometime in 2010 and may not reach today’s lows for a long time to come.

With all of the foreclosures and bad financial news one would think that there is nothing going on in the refinancing market segment right now. But, that is far from the truth. There are still some great reasons to refinance your mortgage. Doing so will deliver five advantages to you.

1. Low Rates
Rates are still at their lowest in a very long time. And, it appears that since the economy might be on an ‘upswing,’ the rates could increase very soon. Rates currently hover around 5% which makes finance charges a small part of a mortgage payment. There is another benefit of this: being able to afford a 15-year mortgage. This will allow you to pay off your loan sooner and build up equity quicker at the same time.

2. Replacing an ARM
Getting out of that adjustable rate mortgage is mandatory because of the increases in payments that they will bring or have brought in the last year or so. With budgets stretched thin, families can ill afford to have this happen right now. Those who were comfortable with their payments suddenly wake up to find that they have increased in such a manner as to prevent them from being able to make them.

3. Financing is More Plentiful Than You Might Think
There are still banks failing and being bailed out by the FDIC, but there are still many solvent and cash-heavy financial institutions like credit unions that would like a bigger piece of the action on mortgages. Not just any mortgages, though. They want good solid financing deals that are good for both the homeowner as well as themselves.

4. Affordable Payments
Using our refinancing calculator, you can see just how affordable your payments can be. When you compare the numbers from this calculator to your current figures, you will be able to see yourself with lower affordable payments which will provide breathing room in your budget.

5. Individual Attention and Advice
Since there are fewer buyers and homeowners financing houses right now, mortgage companies are not as busy and can afford to spend more time with customers and provide greater service that is needed to make sure that each customer gets the financing that they need. During the rush to finance sub-prime mortgages, it was difficult to get the attention that you needed to make sure that the details were being handled properly.

Not all news is bad right now: refinancing makes a lot of sense for many people.

Today Freddie Mac reported another week of dramatic mortgage interest rate hikes. The average rate on a 30-year fixed rate mortgage grew to 5.59 percent during the week ended June 11, 2009, up from 5.29 the previous week. That is the highest rate since the week ended November 26, 2008, and represents almost a point difference from the all-time record low of 4.78 percent in April.

So what is behind another huge jump in rates? According to Freddie Mac’s vice president and chief economist, Frank Nothaft:

“Mortgage rates followed the increase in bond yields this week as the May employment report showed that the economy lost fewer jobs than the market consensus had expected,” …As a result, federal funds futures rose after the report, signaling that the market expects the Federal Reserve may raise its benchmark rate sooner rather than later.”

So as the economy seems to be beating analysts’ expectations, mortgage rates are rising. While rates are still quite low by historical standards, the trouble is there are still plenty of struggling homeowners looking to refinance into lower rates to save their homes. The higher rates go, the less helpful refinancing will be in stemming the tide of foreclosures. And all this in spite of the Federal Reserve’s best efforts to keep mortgage rates low by zeroing out its funds rate and buying up toxic mortgage-based securities from worried lenders.

So the paradoxical cycle continues – the economic outlook starts to look, not good, but at least not as bad, causing mortgage rates to rise, resulting in more foreclosure among those who bought or refinanced during the housing bubble. Apparently even the government cannot keep this cycle from playing out. Maybe this is just the natural re-balancing of the housing market to pre-boom days.

Demand for refinance loans are on the rise and have been for many months now. And for those can qualify to refinance, the savings can be very significant as interest rates are at ultimate rock bottom. In fact according to the Freddie Mac quarterly Refinance Report,  roughly half of all those who refinanced during the first quarter of 2009 saw a decrease in their annual mortgage interest  by 20 percent or more. That works out to be an interest rate reduction of about 1.25 percentage points.

 “Mortgage rates for conventional conforming 30-year fixed-rate loans reached 50-year lows in the first quarter of 2009 in Freddie Mac’s Primary Mortgage Market Survey®, and averaged just 5.06 percent over the quarter with 0.7 points. With mortgage rates this low many people were able to make their mortgage payment a lot lower,” noted Frank Nothaft, Freddie Mac vice president and chief economist. “The payment savings from ‘rate-and-term’ refinancing done during the quarter is about $160 a month on a $200,000 loan and in aggregate this adds up to about $2.5 billion in extra spending cash in the pockets of those homeowners to spend over the coming year. If this pace keeps up for the rest of 2009, that will provide homeowners about $10 billion in mortgage-payment savings during the first year after refinance.”

He added that “we expect refinance activity to be very high in the near term. These programs make it possible for borrowers with current loan-to-value ratios of up to 105 percent to qualify for a refinance that until recently they may not have been able to do.”

And mortgage blog refinancingcondo.com recently spelled out how you can benefit from the new Obama refinance plan if you are looking to cash in on these savings. Here’s how the plan can help you, according to that site:

“-Refinancing or modifying a home mortgage would be easier and more streamlined for all homeowners.

-Help homeowners who have seen their property value drop by 15% or more as a result of this mortgage crisis.

-Help homeowners who are facing foreclosure or defaulting on their mortgage by allowing them to refinance their home mortgage into a fixed rate 4.5% home mortgage.”

Now’s the time to refinance if you can. You are not likely to see rates get any lower any time soon and the savings can be phenomenal!

Both mortgage interest rates and the demand for home loan funding tapered off in the past week, according to separate reports from the Mortgage Bankers Association and mortgage giant Freddie Mac.

Freddie Mac’s Primary Mortgage Market Survey found that during the week ended February 12, 2009, the average rate on a 30-year fixed rate loan, excluding points, fell to 5.16 percent from 5.25 percent the week before. One year ago, the average rate was 5.72 percent.

Rates on the 15-year fixed rate mortgage slid to 4.81 percent, from 4.92 percent one week earlier. Last year at this time, the average rate was 5.25 percent. One-year adjustable rate mortgages averaged a rate of 4.94 percent, growing slightly from 4.92 percent, but still down from last year’s average of 5.00 percent.

“Interest rates for 30-year fixed-rate mortgages are almost 1.5 percentage points below 2008’s peak set on July 24, 2008, offering many homeowners an incentive to refinance,” said Frank Nothaft, Freddie Mac vice president and chief economist. “…The Bureau of Economic Analysis estimated that the weighted average mortgage rate of loans outstanding was about 6.2 percent in the fourth quarter of 2008. As a result, the share of refinancing among the total number of conventional mortgage applications has exceeded 50 percent for the past 11 weeks and averaged 80 percent over this period, according to the Mortgage Bankers Association.”

However the MBA’s weekly survey reported that the total number of mortgage applications was down almost 25 percent during the previous week. The group’s refinance index fell 30.3 percent while the home purchase index dropped 9.8 percent to the lowest level in over 8 years.

The falling demand for mortgage money is apparently a reflection of rates reaching a two month high during the week ended February 6, 2009 as well as people choosing to move back to the sidelines waiting for home prices and interest rates to keep falling.

After being taken over by the U.S. government in September, mortgage lending giants Fannie Mae and Freddie Mac are being retooled to get the troubled housing market back on track, instead of focusing on creating larger profits for the company shareholders and executives.

This means drastic cuts and changes in the personnel and policies, initiated at the direction of two new CEOs, hired seven weeks ago when the government took control of the failing mortgage lenders.

“Anything that is not necessary under the old traditions, we are going to discard,” said Fannie Mae Chief Executive Herb Allison Monday.

“Instead of focusing on maximizing returns, we (will) focus on what is the minimum return on capital that is necessary,” added Allison.

And Freddie Mac’s new CEO echoed the same sentiments.”Providing more liquidity to the market has been our primary focus,” said David Moffett, at a conference for the Mortgage Bankers Association.

Some of the changes that have already been made include a decision by both companies to halt future processing fee hikes that would bring in more profit, but make it more expensive and challenging for home buyers to get a mortgage loan.

Freddie Mac also announced last week that it will no longer accept no-doc loans, mortgages requiring no proof of income. These “liar loans” allowed many to jump into the housing market without truly having the ability to make the monthly payments. The result has been an intense rate of default, leading to a housing market overstocked with foreclosed homes.

Both Allison and Moffett have aimed much of their energy at helping borrowers refinance out of their costly adjustable rate mortgages into more affordable terms, hopefully saving them from foreclosure. And while Fannie Mae alone has saved 300,000 borrowers this year from losing their homes, according to Fannie’s Allison, “that is not good enough. We need to ramp up our activities.”

Average interest rates on mortgage loans around the country decreased in the latest week, bearing good news for eager borrowers but reflective of a slower economy in general.

“Interest rates for fixed-rate mortgages continue to drift down as reports of economic weakness persist,” said Frank Nothaft Thursday, vice president and chief economist for mortgage giant Freddie Mac. “…However, the housing front is providing some encouraging signs. The pace of home price declines slowed down for the fourth straight month in June and the number of metro areas exhibiting monthly gains rose from seven to nine… There are also signs more buyers may be getting ready to return to the market.”

The average rate on a 30 -year fixed rate mortgage fell to 6.40 percent, excluding points, during the week ended August 21, 2008, down from 6.47 percent the previous week. The current rate is also down significantly from one year ago when it stood at 6.67 percent.

Fifteen-year fixed rate home loans carried an average interest rate of 5.93 percent, down from 6.00 percent the week before and from 6.12 percent during the same week of 2007.

Rates on one-year adjustable rate mortgages (ARMs), however, rose to 5.33 percent from 5.29 percent one week earlier, but were much lower than the 5.84 percent rate of a year ago.

Mortgage interest rates generally follow market opinions about overall economic health. When the economy is perceived to be flourishing, interest rates tend to increase. Yet if analysts on Wall Street predict financial doom and gloom, rates tend to fall.

While mortgage rates did fall in the past week, there are some new rays of light for the home loan industry. During the same time, applications for mortgage loans increased slightly for the first time in the three weeks, according to the Mortgage Bankers Association, indicating a small jump in home buying activity. Additionally, the MBA’s figures signal an incremental rise in the number of homeowners taking advantage of refinancing options.

And while no one expects a dramatic comeback of the housing market, recent interest rate and application data as well as other indicators are giving economists hope that the “bottom” is here or at least very near.  An index of national house prices for the second quarter, released Tuesday and known as the Standard & Poor’s/Case-Schiller index, showed a drop of 15.4 percent in home prices, but also revealed that prices were falling at a slower pace than in previous months.

“If you look at the year-over-year numbers they are still going down but not accelerating to the downside quite as much as they had been in a number of cities,” said David Blitzer, chairman of the index committee at Standard & Poor’s. “So we are seeing hints of bottoms.”