Refinance Volume Waning As Rates Continue to Rise

Rising interest rates are taking a bite out of refinancing, as the fewest amount of homeowners since 2008 are currently eligible for refinancing, and the volume of all refinance loan originations are at their smallest share since 1995.

Experts predict that the volume of refinance originations shrink again this year. Guy Cecala, chief executive of Inside Mortgage Finance, "expects some smaller nonbank lenders to sell themselves by the end of the year because of the drop in the refinancing market and mortgage originations overall." Realtor.com reports that as mortgage rates go up, the average credit score of refinance loans tends to decrease, and the diminishing volume attracts a different type of borrower than when rates are low, "some borrowers who are refinancing now are doing so to get rid of their mortgage insurance."

Home-purchase activity has so far been holding up. Sales of previously owned homes in February rose 1.1 percent from a year earlier, countering worries that a downturn the previous month signaled a peak for the market ... While purchase activity has climbed steadily from a post-financial-crisis nadir in 2011, growth in 2017 wasn’t enough to offset a $366 billion decline in refinancing activity. The result: The overall mortgage market fell around 12 percent, to $1.8 trillion, according to Inside Mortgage Finance.

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