In just the first couple of months of the year, about 1.4 million borrowers lost the interest rate incentive to refinance according to an analysis from real estate data provider Black Knight.
In the opening weeks of 2018 interest rates have surged, making it more expensive to buy and own a home. The benchmark 30-year fixed-rate mortgage averaged 4.43% during the week ending March 1, according to Freddie Mac’s weekly survey.
The spike in 30-year fixed interest rates, at a time of continuously rising home prices, has pushed home affordability to its lowest level since 2009, and cut potential refinance loan candidates by 40%, according to Black Knight’s Mortgage Monitor report.
Refinancing isn’t solely based on interest rates, borrowers also have to have enough equity in the home, and appear creditworthy – to have a job and have been paying the existing mortgage faithfully, in other words.
There are still 2.65 million potential refi customers likely to qualify and benefit from a loan refinance at current rates, but this is the smallest this population has been since 2008, prior to the initial rate decline during the recession.
Most housing finance experts expect the shift away from refinances to bite into overall mortgage lending this year. Data from the Mortgage Bankers Association shows that mortgage applications for refinances held steady throughout January, even as rates jumped. It wasn’t until mid-February that they turned sharply down: the number of applications to refinance in the week ending February 23 was nearly 10% lower than the same period last year.
If those figures are any indication of the year ahead, industry participants believe many Americans will rush to get ahead of rates that are only expected to go higher from here.
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