Last week’s massive drop in mortgage rates opened the door to serious savings for existing homeowners.
According to analysis from Black Knight, a technology services provider for mortgage lenders and servicers, more than 4.9 million homeowners could now see an at least 0.075% drop in interest rate if they refinanced their mortgage loan today. That’s 1.6 million more than it was just one week ago.
The increase is thanks to a record-setting dip in mortgage rates last week. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage was 4.06% last week—down from 4.28% the week before and the biggest single-week drop in rates in more than a decade.
“While this will certainly impact buying power and housing demand as we enter the spring homebuying season, it’s also had a massive impact on refinance incentive almost overnight,” Black Knight reported in its newly released Mortgage Monitor.
Still, homeowners might want to hurry if they’re looking to take advantage of that rate incentive. Thanks to softening home price growth, tappable home equity is actually down. Homeowners lost $229 billion in equity last quarter and $348 billion the quarter before that.
Tappable equity also dropped in 90% of the nation’s highest-equity housing markets, as well as the 15 largest markets in California. According to Ben Graboske, president of data and analytics at Black Knight, it all comes down to home prices.
“Once again, the decline is being driven by falling home prices in some of the nation’s most expensive markets,” Graboske said.
The average California home price fell by more than $14,000 in the second half of 2018. In total, California has seen a 9% decline in tappable equity.
Graboske stresses that this drop in equity isn’t a sign of “stress on the market as a whole.” It just means homeowners will have less to borrow against, should they use a home equity loan or apply for cash-out refinancing.
- Originally posted on Forbes