Keith Sanford

Mortgage rates in the past few months have dropped to historic lows, and homeowners in the Chattanooga area have been filing into loan offices across the county to take advantage of them, according to local bankers.

They are using the money for upgrades to their homes and catching up on bills, but they are also using the opportunity to refinance to get themselves out of mortgages with adjustable rates, said Don Oakes, president of Chattanooga-based Mortgage South.

“Roughly 40 to 50 percent of everything we are doing right now is a refinance,” he said. “So it’s a healthy mix of purchase and refinance.”

Last year at this time, refinanced mortgages were about 20 percent of the loans he was making. Other bankers in the area also have seen a spike in the number of calls about refinancing their home loan.

“I would say there were a lot of inquiries while rates were down,” said Chad Harris, a loan officer for Magna Bank in Chattanooga and a past president of the Chattanooga Mortgage Bankers Association.

But, he said, that interest dropped as rates increased over the last few weeks. Mr. Oakes also said he had noticed a decline from the number of applications he saw when mortgage rates were in the 5 percent range.

“In recent weeks as rates rose from 5.5 percent to 6.25 percent, it has dropped off a little,” he said. “I’ve got 10 to 12 applications sitting because rates jumped up in the last month, so it’s like as soon as we get back to 5.5, let’s pull the trigger and go for it.’’

Even though rates have risen over the last month, people are still drawn to refinance because they may have a mortgage about to reset, Mr. Harris said. From what he has seen, the people looking to get out of their adjustable rate mortgages and into a fixed-rate loan make up about half of those looking for loans.

Keith Sanford, executive vice president at First Tennessee Bank, said he also has seen the number of refinanced loans in general rise about 50 percent from last year as a direct result of the low rates.

“Rates have dropped, more so on the short end than the long end, but still they have dropped enough that people who have higher rates are going out and refinancing, which is good, and we see it both on bank loans that are in the bank and in our mortgage area,” he said.

And while the rates may be low, some of the lending has tightened, they said. At Mortgage South, lending is a little more restrictive than last year, Mr. Oakes said. And even with the tighter guidelines, requiring more documentation and proof of income, loan officers said consumers could still benefit.

“The vast majority, we are not having any problems getting them refinanced into some kind of better rate than what they’ve got,” he said.