7.4M Home Owners Lose Out by Not Refinancing

Recent reductions in the 30-year fixed-rate mortgage could net the population of borrowers big savings if they would refinance, according to Black Knight Financial Services’ latest Mortgage Monitor Report.

“Before the most recent reductions in the average 30-year mortgage interest rate, approximately 6 million borrowers met broad-based ‘refinancibility’ criteria,” says Trey Barnes, Black Knight’s senior vice president of Loan Data Products. “These criteria assume loan-to-value ratios of 80 percent or below, good credit, non-delinquent loan status, and current interest rates high enough that borrowers have an incentive to refinance. In light of where rates are today, and looking at borrowers with current notes at 4.5 percent and above, that population has now swelled to 7.4 million — almost a 25 percent increase. This is a relatively conservative assessment, though, as those with current rates of 4.25 percent to 4.5 percent could arguably benefit from refinancing as well. That group adds another 1.7 million borrowers to the population.”

A separate study by the National Bureau of Economic Research found in an analysis of 1 million fixed-rate mortgages that 20 percent of Americans who failed to refinance could have saved more than $45,000 in payments over the life of their loan. At the time of the study, average interest rates were around 4.3 percent. In recent weeks, the 30-year fixed-rate mortgage dipped below 4 percent, sinking to the lowest levels in more than a year, according to Freddie Mac. However, some home owners are struggling to refinance as their home values continue to recover.

Source: Black Knight Financial Services