In the world of mortgage rates, it’s sometimes a game of inches.
This can be true for both potential homebuyers and current homeowners looking for price relief.
Granted, if you’re that marginal when it comes to affording a home, maybe you should consider renting until it’s more definitive.
But if you already own a home and carry a high mortgage rate, the next six months or so could make or break your refinancing opportunity.
Recently, mortgage rates have retreated from recent lows of just over 6%, back to levels of around 6.625%.
As a result, many millions of homeowners no longer “have the money” to refinance. But this could change in an instant, just as it has already happened.
Are current mortgage rates at least 0.75% lower than your rate?
A New report ICE revealed that the refinancing population rose to more than 4.3 million thanks to interest rate hikes that came to an abrupt end, ironically after the Fed cut interest rates.
At the time, the average 30-year fixed mortgage was about 6.125%, up from about 7% in late July.
This means that the population that can be refinanced has increased from approximately 1.2 million to 4.3 million in less than two months.
Of those 4.3 million, 65% took out their mortgages over the past two years, including 1.4 million in 2023 and 1.3 million this year. So this whole modified date, marriage to home thing could actually work.
ICE considers a homeowner to be “in-the-money” for the refinancing and refinancing rate if their current mortgage rate is at least 0.75% below prevailing market rates.
So any borrower with an interest rate above 7% would have met this definition in mid-September.
But today only borrowers with mortgage rates around 7.5% will benefit from refinancing.
If you want to get more into the nitty-gritty, highly qualified refinance candidates must have a 720+ FICO score and a loan-to-value (LTV) ratio of 80% or less.
Of course, circumstances can change quickly. As I wrote a few days ago, mortgage rates do not move up or down in a straight line.
This means that the recent rise may just be a temporary and short-lived hiccup. Mortgage rates have seen periods of relief on their way up. They can also see periods of pain on the way down.
The boom in the real estate refinancing sector depends on interest rates continuing to fall until 2025
As you can see, even minimal rate changes can impact millions of homeowners looking for payment relief.
The good news is that ICE expects 30-year fixed mortgage rates to continue falling into the final months of the year and into 2025. For the record, I agree with them.
Their latest estimate, calculated using the one-day difference between the APR futures rate-weighted average loan balance and the simple average daily rate, has it reduced over 30 years to 5.85% by March 2025.
Granted, it also set the 30-year interest rate at 6.17% for October 2024, so some of the latest adjustments may not have been accommodated in its time-sensitive report.
But as mentioned, it’s a good idea to zoom out anyway, and pay less attention to daily or even week-to-week noise.
A lot can happen in just a few days, and we have two big reports coming out tomorrow and Friday, the CPI report and the Producer Price Index report.
Both could push interest rates on a downward path. They can also push interest rates higher…
If ICE’s long-term forecasts hold true, there will be a nice little refinancing boom for loan officers and mortgage brokers in early 2025.
Rates may also approach the so-called magic number of 5.5%, at which point you’ll get more homebuyers entering the market as well, perhaps just in time for spring.
This is a bullish state for the mortgage market, but it is still very high. You can see how volatile it all is even as a 0.125% or 0.25% rate difference could affect millions.
Read on: Basic refinancing rule.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My work experience in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) homebuyers better navigate the home loan process. Follow me on Twitter for hot takes.
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