August 14, 2019
The Strange Inverse Relationship Between Rising Rates and Refinance Numbers in January
Common sense would seem to dictate something simple: when rates fall, so the number of people looking to refinance their mortgages (and thereby to get a lower interest rate on their mortgage payment) should rise. After all refinancing is basically a means by which to pay off an existing loan and put a cheaper one in its place. But in late 2018-early 2019 we saw something slightly different play out in the real estate market.
According to a report released on the January market by the Federal Housing Finance Agency, refinances were steady from December 2018 through January 2019—despite the average interest rate falling from 4.64 percent for a 30-year fixed-rate mortgage in December to 4.46 for the same mortgage in January. In particular, the report focused on refinances made through the Home Affordable Refinance Program (HARP), a program created in 2009 to aid borrowers who were current with their mortgage payments but had little equity—or whose equity had fallen into negative territory, as it did for many people back then—by letting them refinance at lower rates. The program went through a number of changes through the years, eventually reaching the situation where homeowners could refinance up to 125 percent of the market value of their home without needing to secure primary mortgage insurance. The program’s expiration date was extended twice over the years, but eventually it expired on December 31, 2018.
And that may be the reason we saw the strange inverse relationship occur: though refinances through HARP had dwindled over the years as the causes for its creation faded from currency, leading to a mere 1% of national refinances being completed through the program toward the end, that was enough to make a difference. Some of the HARP refinances initiated prior to the expiration date occurred in January, but some people may have jumped on board the HARP ship at the very last minute, causing just enough of a jump in refinances at the end of last year to counteract the slightly lower rates on offer at the beginning of this one.
If you’re looking to refinance your property in Jacksonville, Florida; Rockport, Massachusetts; or Cumberland, Rhode Island, you’ll need a title search to ensure you have clear title to your property in order to mitigate your risks. At Topouzis & Associates, P.C., we perform extensive title searches in these three states, and we provide Owners Policies of Title Insurance so that you can feel more secure in your investments and not find yourself subject to losing properties into which you’ve already poured significant time and money. Contact us for more details.