While mortgage interest rates dipped ever so slightly in the last week, they’ve been trending up for the majority of this year. In fact, the interest rate on a 30-year, fixed-rate mortgage is now more than half a percentage point higher than it was back in January.
And it appears that the consistent rise in interest rates this year has all but dried up refinance demand.
Is it time to say goodbye to refis for a while? It certainly looks that way.
A new report from Ellie Mae shows that purchase loans are now approaching 75% of all mortgages, with refis hovering around historic lows.
Ellie Mae’s latest Origination Insight Report shows that the 71% of all loans closed in July were purchase loans, while only 29% of the closed loans were refinances.
That’s the second month in a row that refis have been that low (and purchases that high).
Those figures also represent the lowest percentage of refis (or highest percentage of purchases, depending on how you look at it) since Ellie Mae began tracking this data in 2011.
To put it another way, refis haven’t been this small of a percentage of overall originations in seven years.
And the trend doesn’t appear to be going away anytime soon.
There was a little bit of good news on the refi front in this week’s Mortgage Bankers Association’s Weekly Mortgage Applications Survey, which showed that the refinance share of mortgage application activity increased from last week’s 36.6% to 37.6%.
But that may just be a blip on the radar as interest rates are expected to continue climbing this year.
And while today’s interest rates are still low by historic standards, they’re still higher than many younger homeowners have seen in their adult lives. Those borrowers aren’t going to refi their 3.95% mortgage into a 4.75% right now, and they certainly won’t do it if rates keep going up, no matter how much their home is worth now.
Welcome to the new normal.