After a steep 30-year fixed-rate mortgage drop to close out March, nearly 5 million homeowners could save if they refinanced their homes.
In the week ending on March 29, the 30-year fixed-rate mortgage fell 22 basis points, from a 4.28 percent average the week prior to and averaged 4.06 percent. It’s the largest one-week drop in a decade, Freddie Mac reported.
“The Federal Reserve’s concern about the prospects for slowing economic growth caused investor jitters to drive down mortgage rates by the largest amount in over ten years,” said Sam Khater, Freddie Mac’s chief economist. “Despite negative outlooks by some, the economy continues to churn out jobs, which is great for housing demand. We have recently seen home sales start to recover and with this week’s rate drop, we expect a continued rise in purchase demand.”
As a result of the rate plunge, there are now more than 4.9 million homeowners with a mortgage who would likely qualify for a refinance and reduce their interest rate by at least 0.75 percent, according to an analysis by analytics firm Black Knight. That’s a jump of more than 1.9 million homeowners than the week prior, the company reported.
“While this will certainly impact buying power and housing demand as we enter the spring homebuying season, it’s also had a massive impact on refinance incentive almost overnight,” Black Knight wrote in its Mortgage Monitor report. “The population of such refinanceable borrowers is now near a two-year high, after hitting a 10-year low as little as four months ago. After seeing refinance volumes drop significantly in late 2018, this is a game changer for both the housing and refi markets if rates hold at this level for an extended period of time.”
The rate drop might be pleasant news to many homeowners have lost some equity within the last year. After hitting $6.06 trillion in the second quarter of 2018, tappable equity has since fallen by $348 billion — with $229 billion of that drop occurring the fourth quarter of 2018, according to Black Knight. The drop, however, is largely among homeowners with more than 20 percent equity in the home and a result of reduced borrowing power rather than more market stress, Black Knight reported.
For more from Black Knight’s Mortgage Monitor report, click here.
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