Easing Interest Rates Prompt Homeowner Refinances
As mortgage interest rates have eased over the past few weeks, more and more homeowners are taking the opportunity to refinance their mortgages and lower their monthly payments. According to a report from The Mortgage Bankers Association, refinance applications were up nearly 60% compared to the same week last year.
Signs of lower inflation and a cooling job market forecast another interest rate cut by the Federal Reserve next month. “If the recent drop in longer-term rates is sustained, then we expect to see another uptick in refinance applications and subsequent refinance mortgage volumes this week,” said Doug Duncan, chief economist at Fannie Mae.
Even with the lower rates, the MBA says applications for home purchases rose by less than 1% from the previous week and were actually down 11% from the prior year. For many would-be buyers the mortgage interest rates are still too high. Record-high prices and a persistent lack of available inventory continue to hamper affordable home ownership.
The average rate on a 30 year mortgage fell to 6.47%, which is the lowest level we’ve seen in over a year. While the lower rate is a welcome sign of an improving economy, it’s still not much lower than the average of 7% where rates have hovered all year.
Says Joel Kan, chief economist for the MBA, “For-sale inventory is beginning to increase gradually in some parts of the country and homebuyers might be biding their time to enter the market given the prospect of lower rates.”
This is NOT the case, however, here in Central Florida. According to the latest report from the Orlando Association of Realtors, the inventory of single-family homes, condos, and townhouses have all decreased week-over-week as the number of sales have continued to increase.
Still, rates will need to come way down for more homeowners to refinance their mortgages. Realtor.com estimates that 86% of all outstanding home mortgages have a current rate under 6%. More than 75% have a current rate under 5%. Homeowners are biding their time for a better offer.
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