Have Homeowners Lost Interest in Mortgage Refinance?

Refinances down but new mortgages are up.

I’m not at all convinced that the recent indifference toward mortgage refinancing has anything to do with rising interest rates. I’m more inclined to assume that because low mortgage rates have been around for an extended period of time, most everyone who wanted to refi has already done so. In addition, we’ve just come out of the holiday season when attention to this sort of thing has always declined. The going rate for a home loans is still under 4.5 percent and rumor has it that The Fed will be steadily increasing interest rates as long as the economy continues to improve. So doesn’t it make sense that homeowners who might have been thinking about refinancing their mortgage are likely be eager to get that done right now?

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Home Buyers on the other hand are still entering the market at a fairly steady pace. There’s a rare balance in the Real Estate market right now, circumstances are favorable for both home buyers and home sellers, and new mortgage applications do not seem to have fallen off in the same way that refis have. In fact I think this might be one of the best Real Estate markets I’ve seen in a long time. In this report from CNBC, Diana Olick reports that new mortgage applications were up 8.3 percent after the close of the holiday season.

Mortgage Applicants ‘Discouraged,’ Refis to Come Down

Refinancers are experiencing ‘discouraged’ feelings about credit, as lending continues to be shackled by too-tight standards.

According to the Federal Reserve Bank of New York’s recently released Survey of Consumer Expectations (SCE) Credit Access Survey, the share of those surveyed who were “too discouraged to apply” across all types of credit in the last year expanded to 7.1 percent, an increase from 5.7 percent.. Application and rejection rates, including for mortgages, decreased in February, with the application rate dipping to 42.3 percent from 39.9 percent since October and the rejection rate falling to 8.5 percent from 9.9 percent over the same period.

Markedly, the share of those surveyed who expect to refinance their mortgage decreased to 8.4 percent from 12.2 percent in October. CoreLogic’s recently released Housing Credit Index (HCI) for the fourth quarter of 2016 confirms the trend.

“Refinance volume will decline with higher mortgage rates, and lenders generally will respond by applying the flexibility in underwriting guidelines to make loans to harder-to-qualify borrowers,” said Dr. Frank Nothaft, chief economist at CoreLogic, in a statement on the Index.

The HCI indicates mortgages approved for single-family homes were largely low risk in the fourth quarter of 2016, with credit scores averaging 737, debt-to-income ratios (DTI) averaging 36 percent and loan-to-value ratios (LTV) averaging 87.1 percent. In the fourth quarter of 2015, credit scores averaged 733, DTIs averaged 36 percent, and LTVs averaged 86.7 percent.