Fewer People Use Mortgage Refinance

The share of mortgages used for refinancing has dropped significantly from the beginning of 2013 to the first few months of 2014. This is not a particularly strong trend, according to experts. At the same time, there are solid reasons why many people do not refinance their home loans.

In February 2013, about 68% of all mortgage loans were used for refinancing. The percentage for February 2014 is 43%. The share of these loans fell by 25% and this is certainly a notable decrease. There are several factors which explain the dramatic drop.

A recent survey carried out by Fannie Mae has revealed that a major cause of the smaller share of refinanced loans is the high rejection rate. It seems that the people who are eligible for refinance have already taken advantage of it while the rest will have to stick to their current loans. Most of the borrowers who stay with their existing loans are low-income individuals, young people who have purchased their first home and those who have poor credit score.

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Even though the lower interest rates are a major motivating factor for mortgage refinancing, this option is not always the most suitable one for homeowners. Some borrowers are unable to reduce their mortgage payments sufficiently. Others are unable to cover the closing costs out of their pocket. There are also borrowers who do not want to extend the term of their mortgage.

Historical data shows that most homeowners typically refinance their mortgage after the 6th year of its term. This suggests that the lower percentage of refinance loans can be explained with the burst of the housing market bubble which occurred just less then six years ago. At the same time, the recent homeowners are happy with their low interest rates and are less likely to refinance.

The downward trend in the number of mortgages used for refinancing may remain especially if the predictions for an increase in the interest rates come true.



Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info

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