Demand for Mortgage Refinance Plummets 60%
With interest rates for 30-year fixed-rate mortgages with conforming loan balances (up to $647,200) surging twice during the last week and reaching 4.80%, the demand for mortgage refinance loans has taken a plunge, dropping 60% compared to 2021.
The last time rates were this high was in May of 2018, and the demand for refinancing then was much higher than it is now.
Mortgage applications increased 1% from last week but this was still a 10% decrease from the same period last year. Despite facing higher prices, lower supply, and soaring mortgage rates, today’s homebuyers do not seem to be discouraged in their quest for purchasing a new home.
Real estate agents say buyers pull out equity from their homes or borrow from their parents to remain competitive in a bidding war for the property they have set their eyes on.
“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve.
Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago.
Refinance application volume is now 60 percent below last year's levels, in line with MBA's forecast for 2022,” said Mike Fratantoni, MBA senior vice president and chief economist.
This trend is causing many homeowners to balk at the idea of refinancing, especially if they already have a relatively low interest rate. Experts agree that the current market conditions are not conducive to refinancing, as most borrowers would be better off just sticking with their existing loan.
However, there are some cases where refinancing could still make sense, especially if the borrower plans to stay in their home for a long time.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
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