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Americans refinance into lowest-ever mortgage rates, despite obstacles

Doug Whiteman
·3 min read
Americans refinance into lowest-ever mortgage rates, despite obstacles
Americans refinance into lowest-ever mortgage rates, despite obstacles

A new report shows mortgage refinancing is close to a seven-year high, and demand for refi loans is more than triple what it was a year ago — even while borrowers are facing new barriers to getting mortgages.

Homeowners looking to take advantage of some of the lowest mortgage rates on record are finding that wary financial institutions have tightened their lending standards amid the coronavirus pandemic.

Millions of owners are still good candidates for refinancing and can slash their monthly house payments, often by $100 or more.

Refinancing becomes more challenging

Picture of young wife and husband in kitchen looking for a mortgage refinance
WAYHOME studio / Shutterstock
Homeowners are finding new challenges to refinancing.

Homeowners whose mortgages have interest rates at 4.25% or higher have been salivating over today's rates that are much lower — at levels never seen before.

The Mortgage Bankers Association says rates on 30-year fixed-rate mortgages have been averaging 3.45%, a record low for the trade group's weekly survey.

Mortgage giant Freddie Mac says 30-year mortgage rates are down even deeper: at an average 3.33%, which is not far from the Freddie Mac survey's all-time low of 3.29% reached in early March. The company is forecasting that rates will average just 3.3% throughout this year.

But in recent weeks, as the coronavirus crisis has worsened, major lenders have made it harder for some homeowners to snare a lower rate.

JPMorgan Chase is limiting new loans to borrowers who make down payments of at least 20% and have FICO credit scores of at least 700.

And United Wholesale Mortgage, another of the country's largest mortgage lenders, is re-checking on loan closing days to make sure borrowers still have jobs, according to HousingWire.

"These measures will likely be unpopular, but they speak to the uncertainty of the times and the difficulty for these organizations to gauge borrowers’ ability to repay at a time when millions of people are suddenly out of work," says Matthew Speakman, an economist with Zillow.

Homeowners overcome the obstacles and keep refinancing

Runner jumping over running hurdle, low angle view
sirtravelalot / Shutterstock
Homeowners are jumping over the hurdles.

Despite the higher standards imposed by some lenders, refinancing has held fairly steady.

Overall mortgage applications slipped 0.3% during the week ending April 17, the Mortgage Bankers Association (MBA) reported last week.

Refinancing requests edged down 1%, the trade group said, but demand for refi loans was up 225% — more than triple — compared to the rate of a year ago.

"The refinance index dropped slightly ... but remained close to its 2013 highs," notes Joel Kan, the MBA's associate vice president of forecasting.

"Borrowers continue to take advantage of low rates to gain some monthly savings, which is a welcome reprieve during these tough economic times," he says.

Homeowners who refinance loans with rates of about 4.25% or higher are cutting their monthly payments by $60 for every $100,000 they borrow, recent research from LendingTree found.

About 13 million U.S. homeowners are sitting on mortgages worth refinancing, according to an estimate from the data firm Black Knight. Are you in that group? Do some mortgage comparison-shopping and see how you could chop your rate — and your monthly housing costs.