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Analyzing Shifts in Mortgage Rates and Refinances

The average interest rate on a 30-year fixed rate mortgage fell to 4.37 percent in February from 4.46 percent in January, according to the February Refinance Report [1] by the Federal Housing Finance Agency (FHFA).

The FHFA report added that although mortgage rates continue to decrease in recent months, they remained above the lows from 2018.

The February FHFA report echoes the sentiment of the January report [2], which showed decreases from December 2018  to January 2019. Mortgage rates fell slightly in January, with the average interest rate on a 30‐year fixed rate mortgage falling to 4.46 percent from 4.64 percent in December.

Borrowers, according to the February report, completed 323 refinances through the Home Affordable Refinance Program (HARP), bringing total refinances from the beginning of the program to nearly 3.5 million. The total volume of refinances through HARP is 0.4 percent and 4 percent of the loans refinanced through HARP had a loan-to-value ratio greater than 125 percent.

Since February 2018, borrowers with loan-to-value ratios greater than 105 percent accounted for 17 percent of HARP loans, and 35 percent of HARP refinances for underwater borrowers were for shorter-term mortgages.

Refinances through HARP represented 2 percent of the total refinances in Illinois, compared to 1-percent nationwide over the last year. Nine states—Illinois, New Jersey, Florida, Michigan, Ohio, Pennsylvania, Maryland, Alabama and Georgia—and one territory (Puerto Rico) accounted for more than 70 percent of the nation’s HARP-eligible loans, with a refinance incentive of June 30, 2018.

The national total of HARP-eligible loans, as June 30, 2018, was 38,818. The above-mentioned states and territory accounted for 28,442 HARP-eligible loans. Approximately 2.9 million loans [3] were refinanced through HARP for primary residences from April 2009 through December 2018.

Overall, while the rates refinances and mortgages is falling, demand seems to be going up. According to Doug Duncan, SVP and Chief Economist at Fannie Mae,  and the Q1 2019 Mortgage Lender Sentiment Survey from Fannie Mae, overall lender sentiment increased recently, and lenders seem to expect demand for both mortgages and refinances to rise in the next few quarters.

"While the results seem to portray the gloomiest picture of purchase mortgage demand during the prior three months in the survey's five-year history, the net share of lenders expecting rising demand over the next three months exceeded the level recorded in the same quarter last year," said Duncan. "Lenders' view of the refinance market was somewhat rosier, as both recent and expected demand improved to the best showing in two years, helping to support lenders' improved profit margin outlook."