
New data from CoreLogic reveals a striking 27% increase in refinancing activities over the past year, a rebound that comes after an all-time low experienced just two years prior.
Current Refinancing Trends
Despite this uptick, refinancing volumes still trail far behind the record highs seen three years ago, when mortgage rates were at historic lows.
This year, however, the number of borrowers eager to refinance has shown clear signs of recovery.
For the first ten months of 2024, CoreLogic reported that refinancing activity amounted to about $347 billion, a substantial rise from the $273 billion recorded during the same period in 2023—the lowest figure in over two decades.
However, this year’s numbers still starkly contrast with the massive $2.2 trillion witnessed in the equivalent timeframe of 2021, when rates dipped near 3%.
Fluctuations in Mortgage Rates
An analysis by CoreLogic over the last five years highlights a notable trend: as mortgage rates decrease, refinancing activity tends to increase.
Last year’s sharp drop of around 120 basis points in rates over the year ending September 2024 sparked the highest refinancing levels in two years.
Yet, the bounce was short-lived; a spike in rates just a month later caused refinancing applications to fall once again.
According to HousingWire’s Mortgage Rates Center, the average interest rate for a 30-year conforming loan has seen a year-over-year hike of around 20 basis points, now settling at 7.05% as of Monday.
This figure, however, is a decrease from the peak of 7.58% recorded in early May 2024.
In the case of 15-year conforming loans, the fluctuations have been even more dramatic.
Starting the year at 6.05%, this rate climbed over 7% by early July, only to drop to about 5.5% by late September.
Despite the Federal Reserve’s three rate cuts since September, the 15-year rate reached 7.18% in early December, currently resting at 7.02%.
Future Predictions for Refinancing
Recent insights from the Intercontinental Exchange (ICE) identified a fleeting opportunity for refinancing that borrowers took advantage of during the fall.
Interestingly, the average refinance borrower in September and October had held onto their previous mortgage for only 15 months—the shortest period in two decades, according to ICE data.
Borrowers who navigated this window managed to slash their monthly payments by over $300.
If mortgage rates continue their downward trajectory, we could see another wave of refinancing.
However, CoreLogic suggests that the pool of potential borrowers may be limited since around 80% of homeowners currently enjoy rates lower than 5%.
On the other hand, about 12% of borrowers have locked in rates exceeding 6%, many of which were secured since early 2023.
These homeowners may find motivation to refinance if rates drop significantly, ideally by at least one percentage point or more.
Looking to the future, several forecasts indicate a decrease in mortgage rates by 2025, despite potential market hurdles.
If conditions align favorably, the refinancing market could see a rejuvenation.
Fannie Mae anticipates a significant boost in refinancing activity, predicting a rise to $529 billion in 2025, which would be an impressive 47% increase from the expected total of $360 billion for 2024.
Source: Housingwire