Refinancing demand plunges 40% from the end of 2020

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It appears that fewer homeowners are rushing to refinance their mortgages. Here’s why.


Key points

  • Last week, mortgage refinancing demand fell 40% from the same period a year ago.
  • Rising mortgage rates may be largely responsible for this decline.

Since mid-2020, mortgage refinancing rates have been at competitive levels, historically speaking. But refinancing rates also increased at the end of 2021. Unsurprisingly, this caused a drop in refinancing requests.

Last week, refinancing demand fell 2% from the week before, according to the Mortgage Bankers Association. More importantly, it is down 40% from the same period a year earlier.

Incidentally, mortgage buying activity also declined last week.

Prices are on the rise but still competitive

Mortgage rates, including refinance rates, ended 2021 on a higher note. This may have caught some potential borrowers off guard given omicron’s predicament.

Given the highly transferable nature of the new variant and the economic damage it could cause, one would think that mortgage rates would have gone in the opposite direction. But so far, the economy does not appear to be too badly hit despite a marked increase in COVID-19 cases nationwide.

In fact, rising mortgage rates can actually be interpreted as a good thing from the omicron’s point of view. Higher rates could be a sign of economic optimism. This is a positive thing for homebuyers because buying a home on the cusp of an economic crisis is not a wise decision.

And it’s not just mortgage rates that seem insensitive to omicron’s situation. The stock market also closed 2021 at a high level, giving investors something to be very happy about as they ring the bell for the start of the new year.

Should we consider refinancing?

If you haven’t refinanced your mortgage since the start of the pandemic, you may want to consider applying for a new home loan if your credit rating is strong and you plan to stay in your home long enough to get out. financially after paying the closing costs of your new loan. While refinancing rates start 2022 on a higher note, they remain very attractive on a historical basis. And given that they have the potential to go up, you might be better off refinancing early in the year rather than waiting.

Generally speaking, your refinancing goal should be to reduce the interest rate on your mortgage by about 1% or more. But even if you can’t, there are other reasons to consider refinancing.

Right now, owners are sitting on record levels of equity. So now is the perfect time to borrow affordably against that equity in the form of cash refinancing.

It might also be beneficial to refinance your home loan if you’re having trouble meeting your mortgage payments. Going from a 15-year loan to a 30-year loan, for example, could mean the difference between being able to stay in your home and having to sell and move out.

If you’re interested in refinancing your mortgage, it’s worth shopping around with the different lenders and seeing what rates and closing costs they’re coming up with. Doing your research could lead to additional savings – and that’s not a bad thing to take advantage of.

A historic opportunity to potentially save thousands on your mortgage

There is a good chance that interest rates will not stay at multi-decade lows any longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger to buy a new home.

Ascent’s in-house mortgage expert recommends this company for a low rate – and in fact, he’s used them for refi himself (twice!). Click here to find out more and see your price. While this does not influence our opinions on the products, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full advertiser disclosure here.


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