A lot of homeowners are not taking advantage of falling interest rates by refinancing, a report from Black Knight Financial Services shows.
Due to falling interest rates, the “refinanceable population” of borrowers increased by 30% during the first six weeks of 2016, according to the mortgage software firm’s Mortgage Monitor report.
As a result, about 3.3 million borrowers could be saving $200 or more per month by refinancing and nearly 1 million could be saving $400 or more, the report shows.
If interest rates drop another 15 basis points or more, it could lead to a refinancing “boomlet” like the one seen in 2012, the firm says.
In a release, Ben Graboske, senior vice president of data and analytics for Black Knight, points out that when the firm last looked at the refinanceable population two months ago, “there were 5.2 million potential candidates and that number was on the decline.”
“That analysis was shortly after the Federal Reserve raised its target rate by 25 basis points, at which time the prevailing wisdom was that mortgage interest rates would rise in response,” Graboske says. “Global economic shocks then sent investors looking for the safety of U.S. Treasuries, driving down yields on benchmark 10-year bonds. Mortgage interest rates began to fall in defiance of prevailing wisdom and the refinanceable population grew by 30 percent in the first six weeks of 2016.
“As a result, an additional 1.5 million mortgage holders could now likely both qualify for and benefit from refinancing, bringing the total number of potential refinance candidates to 6.7 million,” Grasboske says. “Given that refinance originations fell by 27 percent from the first quarter of 2015 to the fourth quarter of 2015, and prepayment rates – historically a good indicator of refinance activity – hit their lowest level in two years in January, this expansion of potential candidates could very well provide a welcome and unexpected lift to the market as we move forward in 2016.”
To check out the full report, click here.