Black Knight: The Equity Is There, But It’s Not Getting Tapped

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Despite record-low interest rates and record-high levels of tappable equity, both the number of cash-out refinances and the volume of equity withdrawn via such loans fell in Q1 2020, according to Black Knight Inc.’s latest Mortgage Monitor Report.

Black Knight Data & Analytics President Ben Graboske says tappable equity totaled $6.5 trillion in the first quarter of 2020 – an 8% year-over-year increase. Moreover, 90% of homeowners who have tappable equity are currently holding mortgages with rates that are higher than prevailing averages.

However, although overall refi activity has not been this high since 2013, the number of cash-out refinances (42% of refi loans in Q1) and the dollar value of equity withdrawn fell for the first time since early 2019.

“Through June 19, cash-out refinance locks were down 6% from the comparable time frame in Q1 2020, while rate/term locks were up 13% – even including the massive wave of refinance locks seen in early March,” Graboske says. “The environment is ripe for that surge of rate/term refinance lending to continue as well. Despite rising delinquencies cutting into the number of homeowners who would otherwise meet broad-based eligibility requirements to refinance, some 13.6 million homeowners still meet those criteria, which include being current on their mortgage, and could shave at least 0.75% off their first lien rates by refinancing.

The month’s data also showed that the 13.6 million refinance candidates in the market today could save an average of $283 per month on their mortgage payment. If all eligible candidates were to refinance their mortgages, they would see an aggregate savings of $3.9 billion per month, representing a potentially significant and much-needed stimulus to the economy. Of these, some 4.6 million could save at least $300 per month on their mortgage payments, while 2.6 million would be able to save at least $400 per month.

For more details from the Mortgage Monitor Report, click here.

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