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Refinance Demand Plunges 40% From Late 2020

Refinance Demand Plunges 40% From Late 2020
Written by Publishing Team

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


the main points

  • Last week, demand for mortgage refinancing fell 40% compared to the same period a year ago.
  • The rise in mortgage rates may be largely to blame for this decline.

Since mid-2020, mortgage refinancing rates have remained at competitive levels, historically speaking. But refinancing rates also rose at the end of 2021. Not surprisingly, this caused a drop in refinancing applications.

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

Incidentally, mortgage buying activity decreased last week as well.

Prices are high but still competitive

Mortgage rates, including refinancing rates, ended in 2021 on a higher note. This may have surprised some potential borrowers in light of the state of the omicron.

Given the highly transferable nature of the new variable and the economic damage it is likely to cause, you would think that mortgage rates would have gone in the opposite direction. But so far, the economy does not appear to have been hit too badly despite the apparent rise in COVID-19 cases nationwide.

In fact, higher mortgage rates can actually be interpreted as a good thing from an omicron’s perspective. Higher interest rates can be a sign of economic optimism. This is positive for homebuyers, because buying a home on the cusp of an economic meltdown is not a smart move.

And it’s not just mortgage rates that seem impervious to Omicron’s situation. The stock market closed in 2021 higher as well, giving investors something to be very excited about as they head into the new year.

Should you consider refinancing?

If you haven’t yet refinanced your mortgage since the start of the pandemic, you may want to consider applying for a new home loan if your credit score is strong and you expect to stay in your home long enough to get out financially afterward. Pay the closing costs of your new loan. While refinancing rates starting in 2022 are higher, they are still very attractive on a historical basis. And given the upside potential, it may be best to refinance early in the year rather than waiting.

In general, your goal in refinancing should be to lower your mortgage interest rate by about 1% or more. But even if you can’t make it, there are other reasons to consider refinancing.

Right now, homeowners are sitting on a record stock level. And so, it is time to borrow at reasonable cost against those shares in the form of cash refinancing.

It can also pay to refinance your home loan if you are struggling to keep up with your mortgage payments. Moving from a 15-year loan to a 30-year loan, for example, can tell the difference between being able to stay in your home versus having to sell and move.

If you are interested in refinancing your mortgage, it is a good idea to shop with different lenders and see what interest rates and closing costs they come back with. Doing some research could lead to additional savings – which is not a bad thing to take advantage of.

Historic opportunity to save thousands from your mortgage

Chances are that interest rates will not remain at multi-decade lows for much longer. That’s why taking action today is so important, whether you want to refinance and lower your mortgage payments or you’re ready to start the process of buying a new home.

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