The rise of mortgage rates over the past few months has triggered a significant slowdown in refinance loans. According to an analysis by CoreLogic [1], the needs of homeowners who refinance in a rising rate environment is different from the rate-and-term borrowers that dominated the market during the refinance boom.
In this video, Frank Nothaft, Chief Economist at CoreLogic, explains how borrowers opt for refinance loans. "Homeowners that obtain a cash-out refinance when rates are at or above the rate on their prior loan may choose a term of up to 30 years on their new loan to keep the change in their monthly mortgage payment as small as possible," Nothaft said.
The analysis [2]found that the share of refinance loans that cash out some home equity is generally very small during a refinance boom. "During 2012, when 30-year fixed-rates fell to an all-time low, the cash-out share of refinancing fell to 10 percent, the lowest recorded in CoreLogic’s public records data during the last two decades," Nothaft noted.