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  • Writer's pictureDistinctive Mortgages

‘Refinanceable’ borrower population swells to 8.2 million.

The population of borrowers with refinance incentive continues on a rate-propelled roller-coaster ride, with another 1.3 million borrowers finding significant rationale as Freddie Mac’s 30-year average fixed rate fell to 3.73%.

That’s according to Black Knight’s latest Mortgage Monitor report, which revealed that the number of "refinanceable" borrowers — defined by the company as borrowers who could likely qualify for a refinance and save at least 75 basis points off their current loan by doing so — swelled to 8.2 million when mortgage rates fell. The 3.73% rate represents a three-year low and the 8.2 million refinanceable borrowers is the most who have refinance incentive since late 2016. At that time, rates began climbing upward from less than 3.5% and there were 8.3 million refinance candidates in the market.

In fact, it’s an increase of 6.3 million borrowers compared to November 2018, when mortgage rates most recently peaked. With an average monthly savings per borrower of $266, that’s an aggregate savings of nearly $2.2 trillion every month. And with borrowers starting to take advantage of refi-friendly rates this spring, activity could continue on an upward trend, said Ben Graboske, Black Knight's president of data and analytics.

“Early estimates suggest closed refinances rose by more than 30% from April 2019, with May’s volumes estimated to be three times higher than the 10-year low seen in November 2018,” he said.

Also of note, more than 35% of the refinanceable population includes borrowers who closed their mortgages last year. That’s approximately 1.5 million borrowers, matching the combined total from the 2013-2017 loan vintages.

Many who took out loans last year have already boarded the refinance train, Graboske said. Prepayments among 2018 loans have skyrocketed by more than 300% over the past four months and are now almost 50% higher than in 2014, the next-highest vintage.

Prepayments on adjustable-rate mortgages (ARMs) also have jumped to a 12-year high, as borrowers look to shed their ARM products for more secure fixed-rate mortgages. And following historical trends, borrowers with higher credit scores are more reactive to falling rates. Borrowers with credit scores of 720 or higher are making 121% more prepayments over the past four months.

Black Knight has recently been closely monitoring the extreme volatility of the refinance population. Last month, the Jacksonville, Florida-based data and analytics company reported a refinanceable population of 5.9 million — a number now dwarfed by the current figure just weeks later.

Source: Scotsman Guide

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