By Tyler Durden
As we detailed on Tuesday, the mortgage refis have cratered to levels not seen since December ’08 amid a spike in interest (and mortgage) rates. Simply put, the population of borrowers who both qualify for a refi and want one given the higher rates has collapsed.
Consequently, the remaining homeowners seeking to refinance are overwhelmingly “cashing out” also known as taking out a new mortgage that’s bigger than the remaining balance on the existing one and using the extra money to do sensible things like home improvements maintain their lifestyle.
And why not: just look at all that sweet, sweet equity…
“When rates are low, the primary goal of refinancing is to reduce the monthly payment,” wrote researchers for the Urban Institute in a recent report. “But when rates are high, borrowers have no incentive to refinance for rate reasons. Those who still refinance tend to be driven more by their desire to cash out.”
To better quantify the drop-off in refis, Black Knight reports the recent spike in interest rates cut the population of borrowers with an interest rate incentive to refinance by nearly 40 percent in 40 …read more