Lenders say home-loan refinancing activity has begun building toward a crescendo in recent weeks following yet another dip in mortgage-loan interest rates.


With lower rates, more people have inquired about reworking home loans to lower their monthly house payment, and those inquiries are translating into a pile of loan applications.


Its hard to put a number on, because its just starting, says Gary Marks, a senior loan consultant here for Washington Mutual Bank. Marks estimates, however, that hes been fielding about 100 telephone calls a day and that inquiries have increased fivefold in the past few weeks, compared with the previous few weeks.


Were stretching at the seams as far as what we can handle, Marks says.


Sound familiar? It could be because loan officers sang a similar tune earlier this year, when mortgage rates hovered at around 7 percent for a 30-year mortgage. That was 1 percentage point to 1.5 percentage points lower than they were in the spring of 2000 and prompted a surge in refinance activity in the first few months of the year by people who had taken out loans with interest rates at 8 percent or higher.


Karen Oaks, manager of Spokane-based Washington Trust Banks home loan center, says mortgage rates have sunk even lower in recent weeks and are closer to 6.5 percent for a 30-year loan, and that half-point drop in mortgage rates has made refinancing feasible for many people with loans in the 7 percent range.


Both Marks and Oaks say a few people are finding that its beneficial to refinance for the second time this year.


A lot of people who have loans in the high sixes have called to see if they should refinance, Marks says, though the answer invariably is no.


Joan Hathaway, a vice president at Spokane-based Farmers & Merchants Bank whos in charge of its home loan center, says that banks refinance activity sustained a healthy accelerated clip of applications through much of the year, and that pace has quickened in recent weeks.


Hathaway says the market has undergone three previous big refinancing booms in the 15 years she has worked at Farmers & Merchants home loan center. She doesnt think this will be the largest flurry of refinance activity to occur during her tenure, but it will be substantial.


The increase in activity, however, hasnt prompted an increase in competition yet, lenders say. During past booms, mortgage companies have besieged the market, but fewer lending institutions currently are operating in the Spokane area than were here last year at this time, Oaks says, citing a proprietary report that Washington Trust Bank commissions.


A lot of mortgage companies went out of business when things got tough last year, she says. Im sure there have been some coming in, but there are less than last year.


Washington Trust cut staffing in its home loan center last year. Since then, Oaks says, its focused on serving its established customers and isnt aggressively seeking a large chunk of the refinancing market.


Even with a more passive approach, the company has experienced a 40 percent increase in overall mortgage-loan activity this year, a large portion of which can be attributed to refinancings, Oaks says. The banks home loan center recently has brought in temporary employees to help with increased volumes.


Other institutions are looking to staff up in response to the current surgesand in anticipation of a solid market for the next six months to a year.


Hathaway says Farmers & Merchants relatively small department likely will nearly double in size, to eight loan-origination staff members from five currently, in the next month.


Marks says Washington Mutual might beef up personnel at its loan center. He expects, however, that loan processing will bog down because of the increased refinancing activity, which will help current staff handle the workload.


Hathaway says, Were finding that in a refinance market, we need to have the staff to sit down and take a look at a persons situation. There are a lot more man-hours involved.


Thats especially true since more people are considering refinancing for around a 1 percentage point interest rate difference, and the decision of whether or not to refinance isnt as clear-cut as if applicants faced a 2 percentage point difference or greater.


Hathaway gives a scenario that she says is similar to those a number of homeowners are contemplating. If a homeowner has a $100,000, 30-year home loan with a 7.5 percent interest rate, the monthly payment for principal and interest would be $669. Lets say that homeowner refinances at a 6.5 percent interest rate, and rolls the cost of the refinancing into the new loan, so the new loan balance actually is $102,000. If kept at a 30-year term, the new monthly payment would be $645. With a $24 monthly savings, it would take just under seven years for the refinancing to pay for itself, and a homeowner would have to plan to live in the house long term for the refinancing to make good financial sense.


As the difference in interest rates becomes greater, the monthly savings increases and the amount of time it takes for a refinancing to pay for itself dwindles.


Some people are considering refinancing to free up even small amounts of cash, Hathaway says, because of the current uncertain economic conditions.