Spokane Journal of Business

Low rates drive surge in mortgage, refinance activity in Spokane

INW banks, credit unions report higher volumes of activity this year

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Veteran Spokane bankers report strong mortgage growth largely in part due to existing homeowners refinancing in order to take advantage of record-low interest rates.

Shane Patnoi, director of mortgage and consumer lending with W.T.B. Financial Corp., the Spokane-based parent company of Washington Trust Bank, says interest rates on a 30-year, fixed-rate mortgage start as low 2.875%, while a 15-year, fixed-rate loan is available for as low as 2.625%, as of Aug. 3.

“It’s not uncommon for rates to drop in an election year,” says Patnoi, who’s occupied his position for almost 12 years. “But these are historically-low rates, and people are taking advantage of them.”

With high demand and a short supply of new housing construction in Spokane, Patnoi says home refinancing has taken center stage in WTB’s mortgage lending department.

He doesn’t expect rates to change any time soon.

“There’s no real impetus to raise interest rates,” he says. “A lot of indicators are saying they’re going to stay this way for quite some time.”

Industry experts, such as Patnoi, say the current level of activity is just what the Federal Reserve had in mind for the real estate economy when it announced on March 15 it was dropping interest rates to zero and acquiring $700 billion in government and mortgage-related bonds as part of a wide-ranging emergency action to protect the economy from the impact of the coronavirus outbreak.

Troy Clute, Numerica Credit Union’s senior vice president of mortgage services and indirect lending, says the Spokane Valley-based credit union has seen mortgage activity increase a whopping 185% over the first half of this year, compared with 2019.

“We’re on a record pace for this year,” he says.

Instead of moving into bigger homes, Clute says homeowners are staying put and taking advantage of “significant appreciation” they’ve built in equity in past years to refinance.

“At these rates, you can move into a 15-year fixed from a 30-year fixed and practically have the same monthly payment,” Clute says.

David Flood, the chief lending officer at Spokane Teachers Credit Union in Liberty Lake, says the timing of the Fed’s response to the pandemic and internal changes made roughly 18 months before the arrival of COVID-19 conspired to fuel extensive growth in the credit union’s mortgage lending effort. 

Near the end of 2018, STCU began advertising more to existing and potential customers the fact that the 86-year-old credit union offers mortgage loans.

In 2018, STCU extended $182 million in total mortgage loans to its customers. New mortgage activity increased by a whopping 143% last year to $442 million. And for 2020, Flood says the credit union projects it will extend $630 million in new mortgage loans, a 43% increase.

“The rate drop has given the desired effect the Fed sought,” Flood says.

In addition to an increase in mortgage loan activity, local lenders say they’re seeing strong activity in the commercial lending sector.

Year-to-date commercial loans at STCU stand at $70 million, with $30 million of that dedicated to Paycheck Protection Program loans, Flood says.

Commonly referred to as PPP loans, those have been offered by the U.S. Small Business Administration to help—and to incentivize—businesses to pay their employees through the nation’s economic downturn.

Though mortgage and commercial business loans are robust, other lending activity has generally decreased.

In comparison to other products and services STCU offers, Flood says through June of this year, auto loans have dipped by $8 million from the first six months of 2019, and credit card activity is off between $12 million and $13 million in 2020 from the year before.

Numerica’s Clute says auto sales at the credit union dipped in April to 540 loans extended, from a little more than 1,000 for the same month the year prior.

Meanwhile, the credit union’s Visa portfolio balance currently is at a three-year low, he says.

“People aren’t socializing and they aren’t vacationing,” he says. “It’s been the opposite of the Great Recession, where many have taken their stimulus money and paid off some debt.”

U.S. Bancorp, the Minneapolis-based holding company for U.S. Bank in Spokane, says average total loans for the second quarter of 2020 were $28.9 billion, 10% higher than the second quarter of 2019.

“The increase was primarily due to higher total commercial loans (24%), reflecting the utilization of bank credit facilities by customers to support liquidity requirements as well as the impact of loans made under the SBA’s Paycheck Protection Program,” U.S. Bancorp says in its second quarter report.

The report says residential mortgages grew 6.4% in the second quarter over the year before “given the low interest rate environment.”

Linda Underwood, U.S. Bank’s regional president in Spokane, says mortgage lending spurred by refinance activity here is  “extraordinary.”

Underwood believes the surge in mortgage activity is testimony to the fact that the American desire to own a home is still strong despite economic uncertainties created by the pandemic.

She says the Federal Reserve’s “well-timed and well-done” lowering of rates earlier in the year has helped drive home ownership demand.

Regionally, Underwood says Spokane and Coeur d’Alene are seeing an influx of homebuyers relocating here from other parts of the country.

“Now working remotely, employees don’t necessarily have to live where their companies are headquartered,” she says.

Kevin Blocker
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