Higher mortgage rates are cutting into demand for refinances, as fewer and fewer borrowers can now get worthwhile savings.
Applications to refinance a home loan fell 4% for the week and were down 39% compared with the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. Just a few months ago, refinance volume was more than 100% higher than the previous year. In addition, the refinance share of mortgage activity decreased to 62.9% of total applications from 64.5% the previous week.
“After reaching a recent high in the last week of January, the refinance index has since fallen 26 percent to its lowest level since September 2020,” said Joel Kan, an MBA economist. “Rates have jumped 36 basis points since the end of January, and last week refinance activity fell across all loan types.”
More than half of all borrowers currently have rates below 4%, according to Black Knight. Rates set more than a dozen record lows last year, but have been rising steadily this year, as the economy recovers from the coronavirus pandemic. Rates rose even further to start this week, but could take a turn depending on news out of the Federal Reserve on Wednesday in its latest policy announcement.
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