News: Historically low interest rates of 2.72% have given a strong boost to mortgage refinancing.
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A record 19.4 million homeowners can now realize big savings on their mortgage refinancing as rates hit a new low.
Key points:
- With Freddie Mac's latest record low 30-year fixed weekly average rate of 2.72 percent, the number of applicants for "investment grade" mortgage refinancing has jumped to 19.4 million, according to Black Knight, a mortgage data and technology provider.
- This is the highest volume of potential candidates ever recorded.
- These borrowers can save an average of $309 per month through refinancing, for a historical total of $5.98 billion in potential monthly savings.
A new historic low for mortgage rates
The average interest rate on the 30-year fixed mortgage has hit a record low 13 times this year, and did so again last week. This has given current homeowners unprecedented potential to save on their monthly payments through refinancing.
With Freddie Mac's latest record 2.72% 30-year fixed weekly average, the number of applicants for "high-quality" mortgage refinancing has risen to 19.4 million, according to Black Knight, a mortgage data and technology provider. That's the highest volume on record.
Black Knight defines "high quality" refinance candidates as 30-year mortgage holders with at least 20 percent of their property value in equity, a credit score of 720 or higher, and who could reduce their current rate by at least 0.75 percent.
These borrowers can save an average of $309 per month by refinancing, for a total of $5.98 billion in potential monthly savings, which is also the highest level in history. This is an average, as more than 4.5 million borrowers can save at least $400 per month and 2.7 million could save more than $500 per month at current rates.
A constant increase in the demand for refinancing
"With 30-year rates still at historic lows, refinance volumes are likely to remain strong in the coming weeks, especially given the record number of eligible applicants," said Andy Walden, Black Knight economist and director of market research. "The third quarter saw an all-time high for refinancing, and data from Black Knight 's Compass Analytics and Optimal Blue divisions suggest that volumes may remain at or above record levels in the fourth quarter as well."
Although refinancing a mortgage is a complex process, 4.6 million borrowers had used it as of the third quarter of 2020, according to the Mortgage Bankers Association.
The number of potential refinance applicants varies by state, population and home value. In higher-cost states, borrowers have larger loans and are likely to be able to save more per month through refinancing.
There is also growing potential for refinances in the single-family market due to record equity in these assets. Home values in residential suburban areas are skyrocketing this year due to pandemic-related behavioral changes. Prices jumped 7 percent year-over-year in September, according to the S&P Case Shiller National Home Price Index.
Sources: CNBC, Freddie Mac, Black Knight, Mortgage Bankers Association, S&P Case Shiller.
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