For large parts over the last two years, mortgage refinancing has been booming as historically low mortgage rates and surging home prices allowed homeowners to save… a lot. In many cases, refinancing even allowed homeowners to take out some cash in the process. That trend is now dying down as mortgage rates surge.
According to estimations from Freddie Mac, mortgage originations peaked at $1.3 trillion in the first quarter of 2021, with refinances accounting for 70% of that historic total. Refinancing volume remained high throughout 2021, hitting a total of $2.8 trillion for the year. In the same year, existing homeowners cashed out $248 billion in home equity, the highest we’ve seen since 2007.
But in the second quarter of 2022, refinancing originations amounted to just $212 billion, down more than 75% from the Q1 2021 peak of $1.3 trillion.
With mortgage rates hitting the highest level since 2008 this month, refinances are expected to stay low through at least the end of 2023. Meanwhile, the volume of mortgage purchase originations remains high for the time being, as elevated home prices force buyers to take on higher loans.
Related: Does Refinancing Your Mortgage Now Make Sense?
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Bautis Financial Advisor Commentary: September 28, 2022