Published by FOX Business | July 10, 2024
American homeowners are sitting on a record $17 trillion in equity, yet the rapid rise in mortgage rates over the past two years has prevented many of them from tapping their equity in order to refinance.
Data published Wednesday by the Mortgage Bankers Association (MBA) shows that demand for refinancing slid 2% last week as mortgage rates remain near a two-decade high. Refinance applications remain 28% higher than they did last year, when interest rates were notably higher.
“Refinance applications decreased for the fourth consecutive week, in line with higher rates,” said Joel Kan, MBA’s vice president and deputy chief economist.
Homeowners held a collective $17 trillion in equity at the end of the first quarter of 2024, a nearly 10% gain from the previous year, according to CoreLogic. That amounts to a gain of about $28,000 per borrower since the start of 2023.
“Home equity is key to mortgage holders who have seen other homeownership costs soar, including insurance, taxes and HOA fees, as a source of financial buffer.” said Selma Hepp, CoreLogic chief economist.
Refinancing allows homeowners to essentially take out a brand-new loan on their property, which is typically used to pay off the original mortgage. It can offer several benefits, including a lower interest rate, a lower monthly payment or a shorter loan life.
Rising home values can give homeowners the opportunity to refinance on more favorable terms. Persistently high mortgage rates, however, have discouraged many homeowners to refinance recently.
