U.S. refinancing activity rebounded in the first week of 2021 in a context where mortgage rates recently hit a new record low. Mortgage Bankers Association (MBA) data showed that the refinance index rose 3.0% in week ended Jan. 1 after falling 8.8% in prior week.
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said that “The record-low rates for fixed-rate mortgages is good news for borrowers looking to refinance or buy a home*, as around 98 percent of all applications are for fixed-rate loans“. The MBA report also highlighted that the average contract interest rate for both the 15-year and 30-year fixed-rate mortgages fell to respectively 2.4% and 3.0%.
On the positive side, U.S. refinancing activity could still increase in the coming weeks. In late November, Black Knight, a mortgage technology and data provider, revealed that “the number of “high-quality” mortgage refinance candidates jumped to 19.4 million“, which is the highest on record. Realtor.com senior economist George Ratiu also said that “around 19 million homeowners could see lower monthly mortgage payments if they were to refinance at today’s levels“.
*Note: Usually, it’s beneficial to refinance if the interest rate is at least 50 basis points lower than the current rate a homeowner has, depending on how high the closing costs are.