Americans are refinancing their homes at a furious clip as they take advantage of interest rates at a 50-year low and, for many, access much-needed cash in households financially strapped by the coronavirus pandemic.
The Mortgage Bankers Association reported last week that refinance activity was up 200% from a year ago and accounted for 67% of all mortgage applications during the week ending May 8. And digital mortgage lender Better.com said it has seen an 80% increase in cash-out refinance applications since the pandemic took hold in March.
A dash for cash as pandemic shutters businesses
Better.com co-founder and head of operations Shawn Low attributes that surge to the need for cash as unemployment hits Great Depression levels and interest rates fall to new lows.
"There's a lot of uncertainty for people, and it's understandable to want to have more cash on hand to meet unexpected and emergency needs," Low said. "A cash-out refinance enables people to meet their short-term liquidity needs by tapping their home equity."
He said his company funded $1.4 billion total in mortgage loans in April. The company said it has seen a 200% increase in demand for all mortgage loans since the pandemic began.
Millennials lead the way, according to Ellie Mae
Ellie Mae, a loan origination software provider that claims 35% of the U.S. mortgage processing market, said it also is seeing all-time high refinancing activity and that millennials are leading the way.
Borrowers between 21 and 40 years old accounted for 38% of the refinancing market in March, up 4 percentage points from February, the company said. Their average interest rate was 3.66%, the lowest since May 2016, Ellie Mae said in its Ellie Mae Millennial Tracker report released on May 6.
The refinance share for older millennials -- 30 to 40 year olds -- was 46% in March, compared to only 21% for the younger set, those 21 to 29 years old, Ellie Mae said its data showed.