Refinancing less popular amid higher rates
Posted on Monday, October 7, 2013 at 11:00:57 AM
Higher residential financing rates - despite still hovering near historic lows - have caused a drop in the number of borrowers refinancing their mortgage.
Recent data from the August Mortgage Monitor, released by Lender Processing Services, highlighted a drop in refinancing activity for that month, the most up-to-date information available.
"We have seen prepayments decline by more than 30 percent since May, when mortgage interest rates began climbing approximately 100 basis points to where we are today," said Herb Blecher, senior vice president of LPS. "As a result, the percentage of borrowers currently in loans with interest rates high enough for refinancing to make fiscal sense has decreased significantly. Over half of borrowers are now 'out of the money' with respect to refinancing."
In addition, the total U.S. loan delinquency rate also declined, down more than 6 percent for August.
Moreover, refinancing could be a smart idea for a number of borrowers. The step may result in a lower residential financing rate, according to Bankrate.com. Higher home equity means an easier time with the process as well.
Refinancing can also help borrowers switch from an adjustable-rate mortgage to a fixed-rate one, which given the current rate fluctuations may be a desirable option for some.