Recent data put out by the Mortgage Bankers Association revealed that their Weekly Applications Survey refinance index dropped to its lowest monthly average since December 2000. They cite higher interest rates which have reduced the incentive for borrowers to refinance. The MBA predicts that rates will continue to increase this year, being driven by strong economic growth, a hot job market, and greater inflationary pressures.
Interestingly, 70% of refinance activity was for cash-outs:
“…Given that rate/term refinancing has declined, the share of cash out refinances has increased, with Freddie Mac reporting that almost 70 percent of recent refinance activity was for the purpose of a cash out, which is defined as a borrower taking out a new loan that is at least 5 percent greater than the previous loan amount…”