New York – November 16, 2020 – More than one-quarter of homeowners with a mortgage (27%) don’t know their current interest rate, according to a new Bankrate survey.
“Millions of homeowners could be missing out on tens of thousands of dollars in savings by not refinancing their mortgages at this year’s record-low rates,” says Greg McBride, CFA, Chief Financial Analyst for Bankrate. “8 in 10 homeowners with a mortgage have not refinanced this year and more than 1-in-4 doesn’t even know what rate they’re paying.”
One-third (33%) of mortgage borrowers have a rate of 4 percent or more, making them likely candidates to refinance at lower rates. 29% have a rate between 3-3.99%, a murky area where some borrowers will benefit by refinancing while those at the low end of that range are unlikely to benefit. 11% have a rate below 3%. The median mortgage rate reported by homeowners carrying a mortgage is 3.75%.
17% of mortgage borrowers say they have refinanced this year, an additional 27% have considered refinancing but haven’t done so, and 52% have not considered refinancing. 4% didn’t know. Despite a year of record-low mortgage rates, 80% of mortgage borrowers have not refinanced.
Why Have 80% of Borrowers Not Refinanced This Year? 33% “It wouldn’t save me enough money” 23% “Closing costs/fees are too high” 22% “Too much paperwork/hassle” 14% “I plan to move or pay off the loan soon” 10% “My credit score is too low” 6% “I wouldn’t qualify due to unemployment/reduced income” 3% “I wouldn’t qualify because I owe more than the home is worth” 17% “Some other reason” 12% “I don’t know why I haven’t refinanced”
“Don’t let the upfront costs of refinancing cause you to dismiss the idea altogether,” says McBride. “The $3,000 in costs incurred today could save you $15,000 over the next decade and $30,000 over the life of the loan. You may even be able to roll the costs into your new, lower rate balance.”
Millennials (ages 24-39) were more likely to have refinanced this year than Gen X (ages 40-55) and baby boomer (ages 56-74) borrowers (21% compared to 16% and 14%, respectively). As compared to millennial (46%) and Gen X (49%) homeowners with a mortgage, baby boomers (58%) were most likely to have not considered refinancing – which may in part be due to boomers having a slightly higher likelihood of moving or paying off the loan soon.
Older millennial (age 31-39) homeowners who haven’t considered refinancing this year were more likely to single out the paperwork and hassle of refinancing (29%) as a reason for not refinancing compared to Gen X (23%) and baby boomers (20%). The same was true for fees and closing costs, with 28% of older millennials pointing to this, compared to 22% of both Gen X and baby boomer homeowners.
Is the Adverse Market Refinance Fee Impacting Refinance Decisions?
Of mortgage borrowers that have not refinanced this year, more than half (57%) say the new 0.5 percentage point Adverse Market Refinance Fee makes them less likely to do so, including 42% that say they are much less likely to refinance for this reason.
The refinance fee makes the majority of baby boomer homeowners who haven’t refinanced this year (63%) less likely to do so, including 49% that are ‘much less likely.’ Their Gen X counterparts (58%) feel similarly, including 41% that are ‘much less likely.’ It is considerably lower among millennial homeowners who have not refinanced, with 42% less likely to refinance including 24% that are ‘much less likely.’
Methodology: Bankrate.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 4,199 adults, of whom 1,330 were homeowners with a mortgage. Fieldwork was undertaken between October 19th– October 22nd, 2020. The survey was carried out online and meets rigorous quality standards. It employed a non-probability- based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.