The 30-year fixed rate mortgage rose just 0.5 points to 3.56% from the week prior. Black Knight, though, reports that the slight increase cost nearly 2 million people eligibility for refinancing.
Black Knight states that the refinancing population fell back to 9.8 million. The refinance population was at a record 11.7 million last week week when the average mortgage rate was 3.49%.
Calculations from Black Knight show the average borrower can save $269 per month.
Andy Walden, Black Knight’s Director of Market Research, said he expects the refinance market to remain strong the remainder of the year if the 30-year rates stay within 3.5% to 3.7%.
Walden said it is “conventional wisdom” that long-term rates will fall during times of economic downturn. He said that any impact on the refi market would depend upon what happens with the 30-year rates in response.
However, Walden warns that falling mortgage rates may not be enough to bring more buyers into the housing market.
“Falling 30-year rates have certainly improved affordability in recent months, and we’ve seen that begin to manifest itself in terms of home price growth rates,” Walden said. “That being said, increased buying power continues to butt up against a tight inventory of homes for sale, which may limit any increase in the number of potential homebuyers able to make their way into the market.”
While refinancing in times of low mortgage rates help homeowners across the board, homeowners who took out mortgages in the last year when 30-year rates were rising are reaping the highest rewards. Walden added that those buyers account for nearly 20% of the refinance volume so far this year.
Black Knight defines refinance candidates as 30-year fixed rate mortgage holders with a maximum of 80% loan-to-value ratio and credit scores of 720 or higher, who could ave at least 0.75% of their current first lien rate by refinancing.
Freddie Mac’s latest Primary Mortgage Market Survey said mortgage rates have been below 3.6% for four-consecutive weeks for the first time since October 2016.
The low-mortgage rate environment has caused a flood refinancing, and Freddie Mac reported last month that August forecasts how mortgage origination will reach $2 trillion in 2019, driven mostly by refinancing.
“Despite fears of an economic slowdown, the U.S. labor market stands firm. Specifically, jobless claims are near historic lows,” said Sam Khater, Feddie Mac’s Chief Economist. “This strong labor market, along with mortgage rates at three-year lows and consumer confidence holding strong, will set the stage for continued improvement in the housing market heading into the fall.”