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The rise of mortgage rates over the past few months has triggered a significant slowdown in refinance loans. According to an analysis by CoreLogic, the needs of homeowners who refinance in a rising rate environment is different from the rate-and-term borrowers that dominated the market during the refinance boom.
In this video, Frank Nothaft, Chief Economist at CoreLogic, explains how borrowers opt for refinance loans. "Homeowners that obtain a cash-out refinance when rates are at or above the rate on their prior loan may choose a term of up to 30 years on their new loan to keep the change in their monthly mortgage payment as small as possible," Nothaft said.
The analysis found that the share of refinance loans that cash out some home equity is generally very small during a refinance boom. "During 2012, when 30-year fixed-rates fell to an all-time low, the cash-out share of refinancing fell to 10 percent, the lowest recorded in CoreLogic’s public records data during the last two decades," Nothaft noted.
