Falling interest rates are spurring a new wave of mortgage refinancing. With the average rate on a 30-year fixed home loan now at less than 4%, there are 7 million homeowners who could cut their current rate by three-quarters of a percentage point. Many are taking notice: Refis are up 28% in the past four weeks. Many of the folks who can gain from refinancing took out their current loans last year.
Still, it’s not a repeat of the boom in refinancing that took place in 2013, when refis made up 63% of the mortgage market. This year, the figure will be 26%. The Fed pumped the brakes on refis when it started upping interest rates in 2015.
Lower rates on long-term bonds aren’t boosting home equity lines of credit. The rates on HELOCs move with the Fed’s short-term rate, which hasn’t been cut yet. So HELOCs are still far costlier than they were when the Fed started hiking its rate several years ago. Also, the 2017 tax law tightened the rules on the deductibility of interest on HELOC 10a.ns. So, even though Americans’ combined home equity is up, thanks to rising home prices, HELOC balances are down 23% from five years ago:
Look for more folks to opt for cash-out refinances to tap their home equity because of the decline in mortgage rates as HELOCs continue to fall out of favor.
David WB Parker is a principal of Parker Associates of Jacksonville, Florida, marketing consultants to the real estate industry as well as the President of PTC Computer Solutions, IT Consultants and Strategists, and also an active real estate sales professional with Barclay’s Real Estate Group. Though based out of Jacksonville, Florida, David and the team at Parker Associates have worked in 17 Countries and 33 States through the years as well as 65 out of 67 counties in Florida. David can be reached at 904-607-8763 or via email firstname.lastname@example.org.