Mortgage rates are going up, and homeowners are abandoning refinancings

Refinancings are comprising their lowest portion of the mortgage industry in more than 20 years.

In 2017, the industry research group Inside Mortgage Finance reported that just 37 percent of mortgage-origination volume happened due to refinancings, which is the lowest level since 1995, according to the Wall Street Journal. The number is expected to drop again this year.

Refinancing activity dropped by $366 billion in 2017, while the overall mortgage market dropped about 12 percent to $1.8 trillion. Rising rates have also meant that not as many homeowners are eligible for a refinancing, with the number of potential borrowers at just 2.67 million, the lowest amount since 2008.

Although home-purchase activity has held up so far, the combination of rising interest rates, low housing inventory and high housing prices could all threaten this in the long term.

Lenders have started to focus more on home-equity credit lines and adjustable-rate mortgages, as initial rates for them are not rising as quickly, in an effort to keep business strong.

“The market has just gotten so very competitive,” Ed Robinson, head of Fifth Third Bancorp’s mortgage business, told the Journal, “because every loan matters.” [WSJ] – Eddie Small