A new Bankrate.com survey found that only 19% of homeowners who had mortgages before the pandemic have refinanced, despite interest rates plunging. A lack of knowledge regarding the potential savings was cited as the most common reason.
Further, 38% of mortgage holders do not even know their current interest rate, and almost half (47%) have not considered refinancing despite the fact that many would likely benefit..
“The most cited reasons for not refinancing might not hold up in this environment of ultra-low rates,” said Bankrate.com Chief Financial Analyst Greg McBride in a statement.
After plummeting to less than 3% near the beginning of this year, the 30-year fixed interest rate slowly bounced back, peaking at 3.34% in March before dropping again to just above 3% as of Aug. 19.
A plurality of respondents who had not yet refinanced said that they did not believe they would save money, while more than a quarter were worried about high closing costs and fees.
According to the survey, at current rates, a large number of borrowers stand to benefit from refinancing. Of those respondents who did know their interest rates, the average was 4.57%. Additionally, 46% of borrowers had a rate of 3% or more.
“Cutting the monthly mortgage payment by $150 or $250, possibly more, can create valuable breathing room in the household budget at a time when so many other costs are on the rise,” McBride said.
As far as demographics, millennials (individuals aged 25-40) were more likely to not know their current interest rate. Somewhat contradictorily, millennials were also more likely to have refinanced their mortgages since the onset of the pandemic, with 28% of those borrowers having refinanced compared to 17% of Gen Xers (aged 41-56) and baby boomers (aged 57-75).
Millennials were also significantly more likely to view home equity lines of credit as a means to fund vacations, investments or cover household bills, which the survey characterized as “troubling.”
Besides a lack of knowledge, income also seemed to dictate attitudes toward refinancing, with 10% of those who had not refinanced indicating they could not afford to. Those with annual incomes of $50,000 or higher were also almost twice as likely to have refinanced compared to those with incomes below $50,000.
Read the full report from Bankrate.com here.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com.
