The mortgage origination market has been on a rollercoaster ride for the past two years, seeing strong lending activity that only began to dip in 2022. Freddie Mac recently dove into historical data examining refinancing trends and savings, let’s take a look.

We all know low mortgage rates in 2021 (that hovered around 3 percent) saw homeowners jumping at the chance to refinance their 30-year fixed rate mortgages and save some money. However, you might be surprised to find out that all of that refinance activity didn’t beat out the level we tracked in 2003. Freddie Mac adjusted the dollar totals for inflation to do a comparison of historical refinance data since 2000. In 2003, the refinance origination volume reached $4.1 trillion (again, in 2021 dollars) while 2021’s refi activity totaled $2.8 trillion.

How much did borrowers save?

According to Freddie Mac, borrowers who refinanced in 2021, on average, were able to lower their mortgage rates by an average of 1.15 percentage points, which accounted for $2,700 in annual savings. This activity excluded cash-out refinances, which contributed to 36 percent of refinances in 2020, and 42 percent of refinances in 2021. Adjusting dollars for inflation, those cash-out refinance borrowers were able to extract an average of $60,214 in 2021 (14.3 percent of their property’s value) and, for comparison, $87,630 (22.4 percent) in 2006.

How will refinance activity change?

While it is expected that refinance volume will decline due to rising rates, Freddie Mac makes the fantastic point that not all refi activity is about the borrower locking in lower rates. Again, a decline is expected, but we can also anticipate a shift toward more cash-out refinances as borrowers look to take advantage of increasing property values to extract equity for other uses. In fact, the Federal Reserve notes the aggregate homeowner equity was up 4.3 percent, or $25 trillion, as of the third quarter of 2021.

Another change to note will be in borrowers paying for discount points. With low rates, many borrowers didn’t see a need to purchase points, but this will likely change as rates have increased. Freddie Mac notes that in 2021, only 30.8 percent of purchase borrowers paid discount points. 36.4 percent of non-cash-out refinance borrowers paid discount points and 47.3 percent of cash-out refinance borrowers paid for points. Freddie Mac also noted that the interest rate difference between borrowers who did and didn’t pay for points was actually small. In 2021, the difference was on 2.99 percent for those that didn’t pay for points and 2.97 percent for those that did.

If you’re looking to stay on top of mortgage data in your area, or wherever your target market may be, The Warren Group has the data you need. Access Deed and Mortgage Data to track both purchase and non-purchase mortgage intelligence, NMLS Loan Originator Data to track lending activity if your area, and even Mortgage Assignments and Releases. Stay on top of current and historical lending activity by checking out Our Data Solutions and asking one of our Data Specialists about the right dataset for your needs.