Interest Rate Hikes Negatively Impact Refi Sector – NMP Skip to main content

Interest Rate Hikes Negatively Impact Refi Sector

Phil Hall
Nov 05, 2018
Today's first-time homebuyer is older and more likely to be single than first-time homebuyers in the 1970s and 1980s, according to a new Zillow analysis

The number of mortgage holders with an interest rate incentive to refinance is now at 1.86 million, 56 percent decrease from the start of the year, according to new data from Black Knight Inc., which added that approximately 6.5 million homeowners now missed their opportunity to refinance because of rising rates, for an aggregate of $1.5 billion in missed savings per month.
 
“This year alone, 2.2 million borrowers had the opportunity to see a 0.75 percent reduction on their first mortgage rates but did not take advantage of the reduced rates before increases to the 30-year fixed rate removed their incentive,” said Ben Graboske, Executive Vice President of Black Knight’s Data & Analytics Division. “So far in 2018, the average 30-year fixed mortgage rate is up 0.85 percent, with 0.35 percent of that rise coming over the last two months after remaining flat for much of the summer. The result is that the refinanceable population has been cut by more than half—56 percent—since the start of the year.”
 
Graboske added that monthly principal and interest payment needed to purchase the average-priced home rose by 18 percent to $190 per month increase since the beginning of the year, which means it now requires 23.6 percent of the median income to make monthly payments on the average-priced home, making housing the least affordable it’s been in nearly a decade.
 
“While still better than the 1995-2003 average of 25.1 percent, we’re close to a tipping point,” Graboske said. “At the start of 2018, just two states—California and Hawaii—were less affordable than their long-term norms. As of today, 10 states have passed those benchmarks and another six are within one percent of long-term affordability levels. Even if home prices were to lock in place where they are today and not rise another dollar, it would take less than a half a percentage point rise in interest rates to make homes less affordable at the national level than long-term norms.”

 
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