Top notch borrowers taking advantage of sinking rates

by Contributor30 Oct 2019

After a period of low attention due to higher interest rates (the 30-year fixed mortgage peaked at 4.94% in November 2018), the first half of 2019 has been a story of climbing refinance demand. In January, rates for 30-year mortgages averaged 4.51%. By the end of June, rates were down to 3.73%. The Federal Reserve action of lowering the benchmark interest rate in July and again in September likely secured a strong refinance mortgage market for the remainder of 2019 and beyond.

Shift in credit scores for prospective refi borrowers
During the first half of 2019, the share of prospective refinance borrowers with excellent credit scores was higher than in 2018, according to the Q2 2019 Refinance Mortgage Consumer Profile Report published by DMS Consumer Finance. This shift is a reflection of consumers refinancing because they want to benefit from low interest rates instead of refinancing out of need.

After a significant dip in late 2017, the share of refinance loan inquiries from consumers with estimated “excellent” credit scores have been on the rise. Despite a quarter-over-quarter drop from 39.3% in Q1 2019 to 36.1% in Q2 2019, the average share of “excellent” inquiries increased year-over-year from 30.9% in Q2 2018. The share of inquiry volume (SOV) from consumers with “good” credit scores decreased by more than one-fifth during the reporting period, falling from 65.2% in Q1 2017 to 50.9% in Q2 2019. Pulling from the “good” bucket, the share of inquiries from consumers with “fair” credit scores increased quarter-over-quarter from 3.2% in Q1 2019 to 13.0% in Q2 2019.

Home value shifts based on region
Average home values for prospective refinance borrowers were up 7.3% in Q2 2019 versus Q2 2018, but the home value shifts have been inconsistent and regional. Comparing Q2 2019 home values to all of 2018, the West was the only region with prices that went up. However, average estimated mortgage balances were down in Q2 2019 compared to 2018 for prospective refinancers in all regions of the country.

Throughout 2017, 2018 and the first half of 2019, more than half of all refinance inquiries came from just 10 states, with eight states consistently on that top 10 list since 2017. Although the order has changed each year, Texas, Florida and California have reliably been the three states with the greatest concentration of refinance inquiries.

Featuring trends on geographic loan distribution, credit scores, home market values, mortgage balances, top consumer segments for the refinance mortgage market and more, the Q2 2019 Refinance Mortgage Consumer Profile Report highlights refinance mortgage market audience trends for the period of January 2017-June 2019, with an emphasis on April-June 2019.