More US homeowners are choosing to refinance, thanks to lower interest rates amid the Brexit vote. According to Mortgage News Daily, the Mortgage Bankers Association (MBA) Refinance Index fell back by 1 percent for the week ending July 15; however, the refinance share of mortgage applications continued to increase, rising 64.2 percent from 64.0 percent the week prior.
While the commotion surrounding Brexit may have died down a bit, rates appear to be staying close to historic lows, so there is still time to refinance for major savings.
Matthew Pointon, Capital Economics Property Economist, recently commented on Brexit’s effect on mortgage rates and stood by the firm’s forecast, which indicated that mortgage rates would not continue to fall.
“The downward pressure on mortgage interest rates from Brexit already appears to be unwinding, with 30-year fixed rates increasing last week from 3.60% to 3.65%,” Pointon told Housing Wire. “Given we expect Brexit will have minimal impact on the U.S. economy, we see no reason to change our forecast for mortgage rates to reach 3.85% by the end of the year, and 5.0% by the middle of 2018.”
Pointon’s forecast still leaves a lot of room for the mortgage shopper seeking refinance even with percentages increasing. Reviewing your mortgage and the possible savings to you by refinancing is a timely decision that should be discussed with your mortgage professional today.
Much of the mortgage minders are in agreement that while interest rates may increase, the amount of increase may be slight enough to still benefit the refinance borrower. Bankrate’s Rate Trend Index conducted a survey and found 18 percent of the panelists surveyed think mortgage rates will increase over the next week or so; 9 percent of those surveyed believe the rates will fall and 73 percent think rates will remain marginally the same.
Housing Wire reports that Goldman Sachs revised its prediction for GDP growth downward following the Brexit vote from 2.25% to 2%. They also predicted the Fed will raise rates just once this year, instead of the earlier prediction of rates raising twice.
According to a la mode, an appraisal forms software company providing exclusive finding to HousingWire each week, the effect of Brexit on higher mortgage application volume, including refinance, has made its way through to appraisals. According to recent data, mortgage appraisal volume jumped 21.9 percent for the week ending July 10.
By comparison, mortgage applications felt the effect of Brexit by quickly soaring 14.2% for the week ending July 10 from the week prior, on the strength of refinance applications caused by lower interest rates.
In measuring the appraisal volume, industry analysts get a better indicator of market strength than in data solely taken from weekly mortgage applications. Fallout is far less for appraisals because they are ordered later in the mortgage process, after creditworthiness is determined.
“Financial volatility resulting from Brexit has created some uncertainty among investors as yields on government bonds have dropped sharply, Treasury yield curves have flattened over the past month, and the Chinese Yuan has depreciated to a six-year low against the dollar,” Fannie Mae Chief Economist Doug Duncan recently told Housing Wire.
“In addition, our view on interest rates continues to be ‘low for long’ as we believe a Fed decision to raise interest rates will likely be on hold until June 2017,” Duncan said. “Brexit’s economic impact on the U.S. will likely be limited, especially from a trade perspective, and should be a near-term positive for the housing and mortgage market as falling mortgage rates have prompted new refinance demand.”
Fannie Mae is now projecting a 2.2 percent increase in mortgage origination volume in 2016 from 2015 to $1.75 trillion, versus their prior forecast of a 2.8 percent drop.