Homeowners hesitant to refinance as interest rates soar: What you need to know
The recent surge in home prices has left many homeowners with a significant amount of equity in their properties. With home equity reaching $17 trillion at the end of the first quarter of 2024, it’s no surprise that many homeowners are considering refinancing to take advantage of this newfound wealth.
However, despite the allure of cashing out on their equity, the current high interest rates are making it less appealing for homeowners to refinance. The average contract interest rate for 30-year fixed-rate mortgages is now at 7.00%, more than double what it was just two years ago. This increase in rates has caused a drop in refinance applications for the fourth consecutive week.
According to Joel Kan, an economist at the Mortgage Bankers Association, while homeowners have seen significant gains in equity in recent years, the high interest rates are deterring many from refinancing. This sentiment is reflected in the recent data, which shows a decrease in refinance applications but a slight increase in mortgage applications for home purchases.
Despite the current stagnant mortgage rates, experts predict that this may change with the release of new economic data, particularly the consumer price index report. Federal Reserve Chair Jerome Powell’s recent testimony before Congress also hints at potential changes in interest rates in the near future.
For homeowners considering refinancing, it’s important to weigh the costs and benefits carefully. While the allure of cashing out on equity may be tempting, it’s crucial to consider the long-term implications of higher interest rates. As the housing market continues to evolve, staying informed and seeking advice from financial experts can help homeowners make the best decision for their financial future.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. The content is based on general research and may not be accurate, reliable, or up-to-date. Before making any financial decisions, it is recommended to consult with a professional financial advisor or conduct thorough research to verify the accuracy of the information presented. The author and publisher disclaim any liability for any financial losses or damages incurred as a result of relying on the information provided in this article. Readers are encouraged to independently verify the facts and information before making any financial decisions.