December 15, 2023
2023 was a tough year if you needed a refinance loan. Purchase loan interest rates and refinance loan rates saw the 8% range move into clear view in 2023. And that stopped some borrowers in their tracks, not wanting to refinance their home loan at a higher rate.
Did it pay to hold off on a refinance in 2023?
The short answer in this particular case is yes. Mortgage rates started moving lower in the final weeks of 2023, and financial pundits are hopeful that the new year will bring more recovery in mortgage rates suitable to tempt those interested in refinancing.
October 2023 High Water Mark For Mortgage Rates?
Rates began recovering from the October highs, recovering back down to numbers in 7% range. There are expectations of further recovery growing in light of the Fed’s statements about not hiking interest rates in 2024.
This may help restart interest in FHA refinance loans. CNBC reports that in the first full week of December 2023, there were encouraging signs. “Applications to refinance a home loan increased 14% from the previous week and were 10% higher than the same week one year ago.”
Downward Trends Or Legitimate Recovery?
Slowing inflation plus an eager anticipation that the Fed’s rate hikes are coming to an end play a part in influencing mortgage rates, including refinance markets.
But is the current downward trend here to stay? It’s far too early to call at press time, but refinance loans are said to have risen to their highest numbers in two months.
Does this automatically translate into a recovering market? No. It may require lower rates over a longer period of time to be perceived as a more permanent direction for rates. Short-term gains or losses don’t matter as much as the consistent move in one direction or the other.
Rates moving lower (even in smaller amounts over a longer period) may indicate a move in a more recovery-friendly direction if those gains persist over time.
A Slowed Down Refinance Loan Market Recovery?
One factor is borrower confidence. Refinance loan applications have increased with the decrease in rates, but there aren’t enough new applications to label it a “recovery”.
There IS more interest in refinance loans, and applications as mentioned previously are increasing. But not at a level (yet) where some form of recovery might be indicated.
A lot of home owners who need to refinance seem to be waiting until the volatility of 2023 seems to be coming to an end. As that perception takes hold, refinance markets will likely experience a general increase in refinance applications across the board. That includes FHA streamline refinance loans, FHA 203(k) rehab loans, or FHA cash out refinance.
Another factor to consider is that many Americans decided to refinance when intetrest rates were at their lowest levels for FHA mortgages. Chances are good these homeowners won’t be looking to do so again anytime soon, at least not while rates are higher than theirs.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
Browse by Date: