Mortgage Prepayments Declining
Mortgage prepayments near 2-decade low Reduced home sales outweighed rate-driven increase
While interest rates fell in recent weeks, January’s prepayment rate neared a two-decade low, according to the latest First Look report from Black Knight.
The prepayment rate in January fell to its lowest level since November 2000 – an 18-year low, according to the report. This is down more than 10% from December 2018 and down more than 25% from January 2018.
The report showed seasonal reductions in home sales outweighed any interest-rate-driven increase in refinance incentive.
With January dropping even year over year, lenders may need to brace for a slower home buying season this year, especially if interest rates once again begin to rise.
And Black Knight’s report isn’t the only one showing a slowdown. In January, new home sales fell 8% on an annual basis, declining the most in western housing markets, according to the latest data from Redfin.
However, Black Knight explained that housing turnover typically bottoms out in January and February, and that prepayments could pick up again if mortgage rates remain low through the early spring home buying season.
The First Look report also showed the national delinquency rate dropped 3.5% from December and 13% from last year in January.
Foreclosure starts rose slightly month over month, about 8.4%, but are still down 19.4% from January 2018. The number of loans in active foreclosure continued to decrease, falling by 6,000 properties from December to January, and by 72,000 properties from January 2018 to January 2019.
Posted on housingwire.com on 2/25/19.