Housing News

Nearly 5 Million Homeowners Could Save Money If Mortgage Rates Fall to This Number

Almost 5 million homeowners are just a fraction of a percentage point away from potentially being able to save money on their mortgage.

Mortgage interest rates have fallen recently and are expected to continue falling this year. And if rates drop by just half a percentage point, nearly 5 million homeowners could be sitting pretty.

If mortgage interest rates hit 6.125%, about 4.8 million homeowners might be able to reduce their payments if they refinance their loans, according to a quarterly report from ICE Mortgage Technology.

More than 3 million homeowners might benefit from a refinance if rates come down below 6.375%, according to ICE.

Rates averaged 6.58% for 30-year, fixed-rate loans in the week ending Aug. 14, according to Freddie Mac data.

“A substantial [number] of people who purchased homes over the last three years are watching on the sidelines for rates to drop so they can refinance into a lower monthly payment,” Andy Walden, head of mortgage and housing market research at ICE, said in a statement.

Despite higher mortgage rates, homeowners were eager to tap into their record home equity.

Roughly 48 million homeowners with a mortgage had about $11.6 trillion in home equity in the second quarter of the year. The typical homeowner could tap into an average $213,000. 

Cash-out refinance activity hit its highest level in nearly three years in the second quarter, according to ICE. These loans made up about 59% of refinances in the second quarter of the year.

These loans allow homeowners to tap into their home equity. Those who qualify to replace their existing mortgages with new, larger ones. The homeowners can then pocket the additional cash and pay back the new balance each month. 

The typical cash-out refinance borrower received about $94,000, increasing their mortgage payments by about $590 a month. Their mortgage rates went up by an average 1.45 percentage points.

“Homeowners are actively drawing on record equity with cash-out refinance loans, signaling increased demand despite elevated rates,” Walden said in a statement.