Hope for Refinance Loans in 2024
But those numbers began to fall in the final weeks of 2023, and financial pundits are hopeful that the new year brings recovery in mortgage rates suitable to tempt those interested in refinancing.
October 2023 Rate Peak?
Rates began recovering from their October peak, moving back to the 7% zone with many expecting further recovery in light of the Fed’s statements about not raising rates in 2024.
This, some report, is “jump-starting” the refinance loan sector. CNBC reports that in early December 2023, “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 Don’t Always Equal a Recovery
A slowdown of inflation, combined with anticipation of the Fed’s end of rate hikes are influencing mortgage rates, and that includes 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.
But that does not automatically translate into a recovering market. It will take sustained lower rates over a longer period of time to become entrenched as a “trend” rather than a short-term move higher or lower.
Rates moving lower, consistently, even if it’s in small increments over a longer period of time does indicate a move in a more borrower-friendly direction.
What Could Slow Down an Interest Rate Recovery?
One big issue 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."
Call it “elevated interest” at this stage, and when it seems clear that the volatility of 2023 is coming to an end, refinance markets will likely experience a rise in refinance applications whether for an FHA streamline refinance, FHA 203(k) rehab loan, or an FHA cash-out refinance.
Another factor to consider? Many refinanced when rates were rock-bottom and that segment of the marketplace won’t be looking to do so again anytime soon.
Applications are likely to increase but at a slower pace than if there hadn’t been such a golden opportunity to refinance at the lowest rates of the 21st century.
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