- theMReport.com - https://themreport.com -

Refinances Hit a Roadblock

refinanceLow mortgage rates do not appear to be enough of an incentive to attract homeowners to refinance their homes.

The total number of loans refinanced through the Home Affordable Refinance Program [1] (HARP) fell in February as mortgage rates remained under 4 percent over the last three months.

According to the Federal Housing Finance Agency [2](FHFA) February 2016 [3] Refinance Report, [4]borrowers completed 6,424 refinances through HARP, bringing total refinances from the inception of the program to 3,393,217.  In addition, HARP volume accounted for 5 percent of total refinance volume, where it has remained for quite some time.

The report showed that mortgage rates also decreased in February, with the average interest rate on a 30‐year fixed rate mortgage declining to 3.66 percent from 3.87 percent in January.​

Borrowers with loan‐to‐value ratios greater than 105 percent accounted for 23 percent of the volume of HARP loans, the FHFA reported. A total of 25 percent of HARP refinances for underwater borrowers were for shorter‐term 15‐ and 20‐year mortgages, which build equity faster than traditional 30‐year mortgages. HARP refinances represented 10 or more percent of total refinances in Florida and Georgia, double the 5 percent of total refinances nationwide over the same period.

In January, Black Knight Financial Services' (BKFS) Data and Analytics division reported in their Mortgage Monitor Report  [5]that as of November 2015, approximately 5.2 million borrowers could likely both qualify for and benefit from refinancing at today’s interest rates.

Although the number of refinancers may appear to be large, it is actually down from over 7 million in April 2015. Black Knight reports that interest rates were under 3.70 percent during this time, and the 20-year rate was 3.96.

Black Knight Data & Analytics SVP Ben Graboske explained, “This population is diminishing, and as mortgage interest rates rise, it will only continue to shrink further.”

Recent analysis of Black Knight's data by NerdWallet [6] found that the 1 percent rule in the housing market is changing among refinancers.

Previously, homeowners typically refinanced if they could get a new rate at least 1-2 percent, or 100-200 basis points, lower than their original interest rate. However, many borrowers could still see a lot of savings on their mortgage payment by refinancing at an interest rate difference of 75 basis points, or less than 1 percent, including closing costs.

So why are homeowners so hesitant to refinance in today's low interest rate environment?

NerdWallet found that homeowners run into the following roadblocks when considering refinancing:

Click here  [6]to view NerdWallet's complete study.