What stops borrowers from accessing record-low rates?
COVID-19 has made the last fifteen months incredibly challenging. However, here is a silver lining: the pandemic has forced us to rethink our status quo. For many people, the timing of this reorganization has been perfect financially, given historically low rates.
As families were rethinking financial obligations and investments, they noticed in the news that the mortgage rate was plunging. Refinancing applications skyrocketed. A mid-October 2020 report from the Mortgage Bankers Association found that nearly two-thirds, 65.6 percent, of all mortgage applications were for refinances during the prior week.
Survey: 5 out of 6 Homeowners Have NOT Refinanced
Clearly many homeowners are taking advantage of refinancing. However, many are not. One industry report found that many homeowners had not refinanced, although the rates had already hit 50-year record lows.
One issue the poll uncovered is that many homeowners do not have strong immediate knowledge of their mortgages, with 27 percent unsure what their interest rate is. For many of those people, pointing out that the current average 30-year fixed-rate mortgage is below 3 percent is unimpressive — whereas those who know their rate are likelier to see the potential for life-of-loan savings and monthly payment reduction.
Furthermore, 5 in 6 mortgage-holding families had not refinanced by the time of the report. The report found that only 17% of respondents had refinanced their mortgages during 2020.
The poll was released in November 2020, so many of those people who had not refinanced by then did by December or have by now. And many more will still be able to take advantage of amazing rates.
19 Million Refi-Eligible
Another report released around the same time (October 2020), from Black Knight, found that 18.9 million borrowers were refinance-eligible but had not yet acted. Here is what the mortgage analytics company defined as refinance-eligible:
Could lower their interest rate 0.75 percent or more with a refi;
Have 20% or more equity in their home; and
Have a credit score of at least 720.
The average monthly payment savings borrowers could score at that time was $297.
Should You Wait for the Rates to Drop?
What’s the picture right now? Here are Freddie Mac’s national averages: 2.87% and 2.15% for 30-year and 15-year fixed-rate mortgage, respectively, for the week ending August 12, 2021 (Primary Mortgage Market Survey).
One reason borrowers say they have not yet refinanced is that they are waiting for rates to drop further. However, rates will not stay low forever — and you certainly do not want to miss out on the savings, which can be in the tens of thousands of dollars over the loan’s term.
At Best Advantage Mortgage, we use our network of trustworthy lenders to get you the lowest rate in your area. Apply now!