PONTE VEDRA BEACH, Fla.–Millions of Americans who bought homes in recent years thinking the then prevailing mortgage rates of 6.5% would come down relatively soon and they could refinance, are now facing a predicament that those higher costs are going to last longer than they had expected, a new report observes.
The Wall Street Journal spoke with three different couples, with mortgage rates as high as 7.6%, who said the current mortgage rates have made it impractical to refinance. At least one of the couples has since listed their property for sale and even cut the price once so far looking to be rid of it.
Old Adage
“The real estate adage that a buyer should ‘marry the house and date the rate” has often worked in the past,” the Journal reported, reminding that millions of homeowners refinanced in 2020 and 2021 when mortgage rates fell to historic lows.
But rates haven’t dropped below 6% since September 2022, and economists don’t expect a return to the lows of a few years ago, the Journal added.
According to data reviewed by the Journal, most of the 7.5 million households with mortgage rates of 6.5% or higher took out those loans since 2022, according to Intercontinental Exchange. “Homeowners often want to reduce their rates by at least half a percentage point to make the costs associated with refinancing worthwhile,” the report added.
Some are Upside Down
As the CU Daily reported https://thecudaily.com/in-one-time-boom-towns-many-are-underwater-on-their-mortgages/earlier, in some markets homeowners are now upside down in their mortgages, as home prices have declined.
Others are feeling strains from rapidly rising insurance rates.
“There is definitely a buyer pool that is feeling the constraints of the rates that they’re in and bummed that they can’t refinance,” Stacey Melton, vice president at Reasy Financial in Peoria, Ariz., told the Journal “I’m still getting calls on the daily from people who want to refinance, and it just unfortunately isn’t making sense for them.”
Feeling Regret
The Journal report also cited a survey that found one in five Americans who bought since the start of 2023 regrets taking on such a high mortgage rate, according to a survey by tech company Clever Real Estate.
The report further noted that some buyers are only now feeling the pinch. Since the start of 2022, 2% to 3% of new purchase mortgages have including temporary buydowns, which can lower the buyer’s mortgage rate for one, two or three years, according to the AEI Housing Center at the American Enterprise Institute.
Despite all that, as the CU Daily reported here https://thecudaily.com/mortgage-rates-decline-again-refi-apps-up-7-new-purchase-loans-are-flat/, new data show refinance activity has continued to rise as rates have declined.
