Refinancing has saved homeowners billions, but window is closing

Most refis are now cash-outs, extending payback timelines for mortgage holders

National /
Nov.November 02, 2021 09:05 AM
(iStock)

(iStock)

UPDATED Nov. 3, 2021, 3:49 p.m.: Low refinancing rates have helped homebuyers save loads of money throughout the pandemic, but signs from the Federal Reserve suggest the window is starting to close.

Indications that the Fed will taper its bond buying have pushed up interest rates in recent weeks, Black Knight noted in its latest mortgage report.

The average 30-year rate on conforming loans is up about 20 basis points since late September. Ten-year Treasury yields are up 33 basis points over the same period.

The increases have winnowed the number of refinancing candidates by 3.4 million, according to the report. That still leaves the number of high-quality candidates at 11.5 million, larger than any time prior to 2020.

The number had never surpassed 10 million before.

The historic refinance boom stimulated by the Federal Reserve has helped homeowners save more than $1.3 billion per month during the pandemic, or $14 billion over the past 18 months.

By the end of next year, those borrowers will have realized nearly $35 billion in aggregate savings, powering a projected $16 billion per year in economic stimulus.

“By nearly any measure, that is an extraordinary level of potential stimulus to the economy as a direct result of refinance lending,” said Ben Graboske, president of data and analytics at Black Knight.

Another 5.5 million homeowners took advantage of low rates and record home price growth to tap into the $322 billion in available equity. With rates rising, cash-outs now make up the majority of refinance activity.

But sucking out equity comes at a cost for homeowners because it adds years to the end date for their loans. The vast majority of recent refinancing have involved rate decreases, however. That’s a change from three years ago, when more than 70 percent of cash-out borrowers accepted rate increases. Refinancing also involves fees to close the loan.

Correction: An earlier version of this story misstated when most cash-out refinancings involved rate increases. It was late 2018.





    Related Articles

    arrow_forward_ios
    (Illustration by The Real Deal)
    More than 14K LI residents in mortgage delinquency
    More than 14K LI residents in mortgage delinquency
    George Filopoulos, Lloyd Goldman and Gurney’s Montauk hotel (Gurney's, Getty)
    Metrovest, Lloyd Goldman secure $218M refi on Montauk resort
    Metrovest, Lloyd Goldman secure $218M refi on Montauk resort
    (Getty Images)
    Hurricane Ida damage could disrupt thousands of mortgage deals in NY, NJ
    Hurricane Ida damage could disrupt thousands of mortgage deals in NY, NJ
    A photo illustration of 17 Ridge Avenue in Spring Valley (Google Maps, iStock)
    Rockland County apartments deemed unsafe in enforcement crackdown
    Rockland County apartments deemed unsafe in enforcement crackdown
    Clockwise from top left: Eric and Bridget Elkin, Diane Mollica, Liz and Lisa Gillooly and Sarah Frigo (Compass)
    Compass aims to grow its North Fork agent count fivefold
    Compass aims to grow its North Fork agent count fivefold
    Schenectady City Council president Marion Porterfield (Facebook, iStock)
    Destructive tenants driving upstate landlords to despair
    Destructive tenants driving upstate landlords to despair
    Southampton Village mayor Jesse Warren (Getty Images, iStock, Illustration by Kevin Cifuentes for The Real Deal)
    Southampton Village allows owners to collect summer’s rent upfront
    Southampton Village allows owners to collect summer’s rent upfront
    331 Elmora Avenue and 103 Ryan Street (Kislak Realty)
    Tri-state deal roundup: Multifamily, industrial still hot
    Tri-state deal roundup: Multifamily, industrial still hot
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...