The GSE said borrowers who refinanced in 2014 will save on net approximately $5 billion in interest over the next 12 months, although significant, the number is down from $20 billion in 2013.
Borrowers cut their mortgage rate by almost one-fourth, or an average interest-rate reduction of 1.3 percentage points, through refinancing, during the fourth quarter of 2014, according to Freddie Mac
Additionally, 34% of homeowners refinanced into a shorter-term fully amortizing loan, to pay down principal and build home equity
faster than on their previous loan.
Mortgage rates are still well below historical norms, according to Bankrate. The average fixed-rate 30-year mortgage is now 3.80%. It was well above 6% as recently as 2008, and in 2000, it was close to 8%.
Refinancing a $200,000 loan from 6% to 3.80% would save $267 per month; refinancing from 8% to 3.80% would save $536 per month. Yet, just over one-third of mortgage borrowers (35%) aren't completely sure of the interest rate they are paying now, according to a new Bankrate report
With declining interest rates as well as the lower mortgage insurance premiums on FHA loans
, some estimate as many as three million current FHA
borrowers will be moved to refinance following the president's action to lower the FHA mortgage insurance premiums
The latest Mortgage Bankers Association’s weekly mortgage application survey showed applications increased 1.3% from the previous week, with the refinance portion of mortgage activity coming in at 71% of total applications.
Borrowers are continuing to take advantage of near record low mortgage rates to lower their monthly payments, shorten their loan terms and choose the safety of long-term fixed-rate mortgages, according to the latest data from Freddie Mac.