Slight increase in mortgage rates takes refi potential down a peg
A mere 7-basis-point increase in interest rates reduced what was a record-high number of borrowers with refinancing incentive by 2 million in a matter of days, according to Black Knight.
Although the uptick to 3.56% still leaves 30-year rates relatively low, it's resulted in a disproportionate 16% drop in the market's refi potential. The number of borrowers in the market with refinancing incentive is now 9.8 million, down from 11.7 million last week.
Black Knight based its estimates on the number of 30-year, fixed-rate mortgage holders eligible to reduce their first-lien financing by at least 0.75% in the current market.
The technology, data and analytics provider considers borrowers likely to be approved for a refinance if they have a credit score of 720 or higher and a minimum loan-to-value ratio of 80%, in line with industry standards.
If these eligibility standards are set aside, there are more than 21 million borrowers with 30-year mortgages and rate incentive.
But mortgage lenders' response to rate-driven consumer demand to date has been to tighten underwriting rather than to expand it.
Lenders may not feel the need to loosen underwriting and capture more loans if low rates are driving enough origination activity to keep their pipelines full.
The current average monthly savings obtainable through refinancing is $269 per person, or $2.6 billion in aggregate based on monthly principal and interest savings.
In other Black Knight-related news, the company has acquired Compass Analytics, a provider of mortgage pricing and valuation services used by loan officers and capital markets professionals. The purchase price was undisclosed.