Blink, and you missed your chance to refi. And according to nationalized mortgage giant Freddie Mac, it's about to get worse.
As shown last week, as a result of the recent spike in yields, the population of eligible refinance candidates has already plunged by more than half. As Black Knight pointed out, as of the end of November, though there are still 2M borrowers who could save $200+/month by refinancing and a cumulative $1B/month in potential savings, this is less than half of the $2.1B/ month available just four weeks ago.
Since then the number has shrunk substantially as rates have continued their relentless move higher.
According to the latest Wells Fargo refi rates, a 30 Year Fixed mortgage will now cost a prospective creditor some 4.625%. This was in the mid-3%s just a few months ago.
It was not just refis: according to the latest Freddie Mac update, the 30 Year Fixed has jumped to 4.16%, from 3.94% just a month ago, and 3.5% as of early October.
As Freddie notes in its latest press release, this week's mortgage rate survey was completed prior to the FOMC announcement. The 30-year mortgage rate rose 3 basis points on the week to 4.16 percent. The MBA's Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases.
- 30-year fixed-rate mortgage (FRM) averaged 4.16 percent with an average 0.5 point for the week ending December 15, 2016, up from last week when it averaged 4.13 percent. A year ago at this time, the
- 30-year FRM averaged 3.97 percent.
- 15-year FRM this week averaged 3.37 percent with an average 0.5 point, up from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 3.22 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.19 percent this week with an average 0.4 point, up from last week when it averaged 3.17 percent. A year ago, the 5-year ARM averaged 3.03 percent.
But more troubling was Freddie's explicit warning, that "if rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017."
Which we find strange, because the catalyst that sent stocks soaring on Thursday, was the latest NAHB homebuilder optimism report, which jumped to the highest level since 2005, rising by the most in over a decade which the NAHB said was "largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability.”
While we understand builders enthusiasm about Trump, we hate to break it to them that without a viable mortgage market, optimism will quickly turn to pessimism. Then again, as the current "Trumpflation euphoria" phase continues, brushing off any potential headwinds, logic doesn't much matter for now.