It seems the recent surge of refinancing has come to an end.
New data from the Mortgage Bankers Association show that refinance applications have fallen for the last three weeks. Rate-and-term refinances have tumbled the most, with cash-out refinances seeing less movement.
It’s all a symptom of stubbornly high mortgage rates. The average contract rate on a 30-year, fixed-rate mortgage was 6.46% across the last week, the trade group says, significantly higher than the average 6% rate seen just a few months ago.
Mortgage refinance rates have fallen considerably since March
Week by week, mortgage refinance activity is falling steadily. The MBA’s Refinance Index dropped 1% over the last week, 5% the week previously, and 4% the week before that.
All in all, refinancing volume has fallen to 40.8% of total application volume — down from a whopping 60% just two months ago.
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Back then, the average contract rate on a 30-year loan was just 6.09%, almost 0.4% lower than today’s rates.
It sounds small, but even a tiny rate drop can make a big difference for the average consumer. On a $300,000 mortgage, for example, that 6.09% rate would make for an $1,816 monthly payment, compared to $1,888 one at current rates. It would also mean a savings of more than $26,000 in long-term interest.
Rate-and-term refinances suffer the most
With recent rate changes, it’s no wonder that rate-and-term refinances — which borrowers use to secure lower rates and payments — are suffering.
According to mortgage platform Optimal Blue, those fell almost 38% between March and April alone.
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For rate-and-term refinances to make sense, borrowers need to be able to trade in a higher rate for a lower one. Considering rates only reached the 7% range a handful of times over the last few years, finding borrowers who can save cash at today’s rates is a challenge.
Cash-out refinances are also down, though not as much. Those dropped 12% between March and April. Both types of refinances are still up compared to year-ago numbers.
“Purchase activity held up well despite rate pressure, while refinance volume reacted more quickly to recent rate moves,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue, in the company’s report. “That split reinforces how rate-sensitive borrowers remain, even as the spring purchase market continues to show resilience.”
