Average Mortgage Payments Fell Nearly 7% at Years’ End

CoreLogic reports the typical mortgage payment fell 6.8% in December 2019 due to a 20% decline in mortgage rates while the average sales price rose 4% to $225,723. This is the eighth consecutive month mortgage payments have dropped year-over-year. 

Mortgage rates have fallen from 4.64% in December 2018 to 3.72% in December 2019.

CoreLogic’s Home Price Index (HPI) and HPI Forecast predicts home prices will rise in 2020 by an average of 4.6%. Mortgage payments are expected to increase just 2.7% during the year as rates are predicted to be 0.2 percentage points lower than the year prior. 

The average mortgage payment in December 2019 was 35.8% below the all-time high of June 2006’s $1,298. The mortgage rate in June 2006 was 6.7% and the average sales price was $197,000. 

Black Knight’s January 2020 Mortgage Monitor reported that refinancing rose 250% annually to hit a six-and-a-half-year high in Q4 2019. Cash-out lending rose to a more than 10-year high.

The report also states that despite the growth of refinancing activity, mortgage services have struggled to “recapture the business refinancing borrowers,” as just one-in-five borrowers remain with their servicer post-refinance. 

“A large driver has been a recent failure to retain 2018 vintage mortgages, which goes to show just how quickly lender/borrower relationships can evaporate without the right data and tools for servicers to early on identify clients in their portfolios with sufficient tappable equity, and act to retain them,” Ben Graboske, Black Knight’s Data & Analytics President. “Borrowers who left for ‘greener pastures’ received an average 0.08% lower interest rate than those who stayed, strengthening the need for tools to ensure rate pricing is competitive.”

He added that retention rate drop is most pronounced among cash-out refinances, as retention fell from 19% in Q3 2019 to 17% in Q4 2019—the lowest reading in more than four years. 

Cash-out lending in 2019 saw 600,000 borrowers pull out an estimated $41 billion in equity from their homes, which is the largest quarterly volume since 2007.

The report states there are currently 44.7 million homeowners with a total of $6.2 trillion in tappable equity.