Refinancing At 2 Year Low
When the average 30-year mortgage rate reached 6.37% in early March, its highest level since September 2003, that robbed more homeowners of a rate incentive to refinance. The benchmark rate remained above 6.3% for the rest of the month.
But rates at that level may not be high enough to deflate home prices, Freddie Mac economist Amy Crews Cutts told National Mortgage News. Freddie Mac predicts that nationally, home prices will rise 8.6% this year, down from 13% last year. Moreover, while Freddie Mac expects home sales to dip from last year's record volume, the pace of sales will remain strong.
And even refinancing will continue to see demand from homeowners seeking to tap into their equity or replace adjustable-rate mortgages with fixed-rate products.
About $400 billion of first lien ARMs will reset this year, and that could leave many tempted to switch into fixed-rate products, especially if the flat yield curve persists.
"It's not that everyone has to go out and get a new mortgage, but a lot of them will take the opportunity to do that," Ms. Crews Cutts said. Economists at Freddie Mac say the bond markets increasingly expect the Fed to raise short term rates three times this year rather than two.
As MSN went to press, the refinancing rate continued to dip. In the last week of March, refinancing accounted for 36.6% of home loan applications, according to the Mortgage Bankers Association, down from 37.3% a week earlier.
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