August 06, 2019
Boom in Refinances Expected, Yet Many Borrowers Aren’t Taking Advantage
The latest mortgage news should be a boon to most homeowners. The average rate on 30-year fixed mortgages has fallen into the 3 percent territory, the lowest rate since November 2016.
Translation? Many homeowners could refinance their mortgages to take advantage of rock-bottom rates. 8.2 million 30-year mortgage holders could likely qualify for refinancing at this rate and save at least 0.75 % off their current rate. With a bit of shopping, many homeowners could save more.
Yet, inexplicably, they appear to be unwilling to shop around.
New data released by Fannie Mae shows that although three of four consumers say they like to shop around for their purchases, only 28% of home buyers looked at three mortgage quotes. Home buyers who don’t shop around for a low rate also tend to avoid shopping around for a lower rate via a refinance, even when rates drop to historic lows.
“Although homebuyers who received only one quote didn’t usually express regret, most still reported trying to negotiate mortgage terms with somewhat less success than those who did shop around,” stated Doug Duncan, chief economist and senior vice president for Fannie Mae.
Why Don’t Homeowners Shop for Mortgages?
Though shopping for the best rate will save homeowners money down the road, the process may be too complicated and time-consuming for most. Further, it seems homeowners don’t value saving money before all else, instead preferring convenience and the ease of working with friendly customer service representatives.
“Non-shoppers also reported much less concern with competitive terms when selecting a lender, citing other non-financial priorities, such as customer service/responsiveness and having a preexisting account with a lending institution. Individual households may have good reason for accepting that tradeoff,” said Duncan.
After all, dealing with changes to your mortgage—even ones that will save you money—can be a stressful process. Homeowners may prefer to pay more if it means they have the same mortgage they’ve always had or get to work with lenders they already trust.
Still, telling those you’ve helped buy homes over the last few years about the ideal conditions for a mortgage refinance can help develop their trust in you and maintain connections with your older clients, which is a must for a healthy real estate business.
Home purchase rates are also favorable. Dropping interest rates means that the average homeowner can afford $45,000 more on a house than they could last fall. So, you may find old clients willing to work with you to find a new home even if they’re not interested in refinancing.
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