Demand for mortgage refinancing skyrocketed in the first week of February, increasing by 18% compared to the week prior. This dramatic rise in demand for refinancing is attributed primarily to decreases in mortgage interest rates, which have been steadily declining for a month. As a result, the prospect of refinancing seems more appealing to many, especially to those who bought mortgages when interest rates were at their peak.
What is Going On?
According to the Mortgage Bankers Association, demand for mortgages overall increased by 7.4% in the first week of February, with much of that increase attributed to an 18% increase in the number of applications for refinancing. This increase in refinanced mortgages is due in large part to five straight weeks of dropping mortgage interest rates, with rates falling to 6.18% from 6.19% the previous week. People are seemingly taking advantage of the declining interest rates to refinance, helping them to get better deals and potentially lower their mortgage payments.
What Does it Mean to Refinance a Mortgage?
When you choose to refinance your mortgage, you are effectively taking out a new mortgage to pay off your old mortgage. The catch is that the new mortgage will have interest rates based on your current credit and current market conditions, which may mean you get far more favorable terms on refinancing compared to the original mortgage. This, in turn, could dramatically reduce the cost of mortgage payments and save money on your mortgage overall.
Why is This Important?
This increase in demand for refinancing is indicative of a recovery in the housing market. For months, demand for mortgages has been declining thanks to skyrocketing interest rates, with demand for refinancing being particularly hard hit. As those rates have begun to drop, demand has started to return, which is reflected in the dramatic increase in applications for refinancing.
How Could This Impact You?
If you are looking to purchase a new home or refinance an existing mortgage, now may be a good time to do so. With interest rates now significantly lower than they were last year, you may be able to secure a better deal on a mortgage than you would have even a few months ago. Sellers, meanwhile, may find it easier to find buyers for their properties, since more people will be willing to take on a mortgage when interest payments are lower.
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