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Is the ‘Brexit’ Effect Wearing Off for the Mortgage Industry?

With mortgage interest rates spending the last eight months below 4 percent and hovering just above historic lows for the last few weeks, one would think the environment is great to refinance a mortgage.

Following an initial spike in mortgage refinances after June’s Brexit vote, however, the data seems to indicate that fewer borrowers are taking advantage of the low interest rates. Black Knight Financial ServicesFirst Look at Mortgage Data for July 2016, released on Monday, indicated that the “Brexit” effect may have worn off. Or many borrowers may not want to refinance—or may not be aware of the current near-record low mortgage rates.

Black Knight reported in the July 2016 First Look that the population of borrowers eligible to refinance their mortgage has swelled to 8.7 million and the average 30-year fixed-rate mortgage is below 3.5 percent, but the monthly prepayment rate—historically a good indicator of refinance activity—declined by 12 percent from June to July down to 1.26 percent (and fell by 1 percent over-the-year).

“We’ve not only seen this scenario post-Brexit, but throughout much of 2016,” said Ben Graboske, Executive Vice President of Black Knight Data & Analytics. “Since February, interest rates have remained below 2015 levels—and there have been more borrowers who could both qualify for and benefit from refinancing—yet refinance origination volumes have trailed 2015 levels in every month so far this year. While there are undoubtedly a large number of borrowers who are taking advantage of today’s historically low interest rates, there also appears to be a growing population who are either uninterested, or simply unaware of the refinance opportunities in the market.”

The First Look also reported an uptick in mortgage delinquencies in July of nearly 5 percent, up to 4.5 percent, likely due to the fact that July ended on a Sunday and payments made on the last two days of the month cannot be financed until the following month. Hence, Black Knight expects a decline in mortgage delinquencies in August.

Click here to view Black Knight’s entire First Look at Mortgage Data for July 2016.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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