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The refinance market has been extremely hot during recent years. Specifically, not long after COVID lockdowns started many lenders found themselves doing so many refinances that it became difficult to make the time to originate a mortgage, much to the frustration of some borrowers looking to take advantage of low rates. But in recent months the refinance boom has slowed down while purchases have remained pretty steady. So, what happened?

There are a variety of factors that have contributed to the shifting market between 2020 and now. Lockdowns and other mandates created a heavy financial burden on many citizens across the United States, which led to the potential for a crisis. To help prevent this, and among other governmental responses, the Federal Reserve lowered its interest rates. The lowered interest rate directly contributed to interest rates on a variety of debt types across the nation falling significantly, as banks and other lending institutions were able to borrow funds at a much lower cost, and then pass some of those savings on to consumers in turn.

As in other markets, interest rates on home mortgages fell when the Federal Reserve lowered its interest rates. Borrowers were more interested than ever to take advantage of remote working opportunities by buying homes and, partially enabled by lowered interest rates, this caused an enormous boom in the housing market that is still being felt today. But at the same time, existing homeowners across the nation saw an opportunity to lower their own interest rate (and, by extension, monthly housing payments) by refinancing their home. Because refinances tend to be a little more profitable in the short term, many lenders prioritized refinances when given the choice to do a refinance or purchase a mortgage.

With that extremely simplified description of the last two years, we come to 2022, where refinancing is slowing down. What happened? Well, one explanation is pretty simple: interest rates started going up again. There’s very few reasons for a homeowner to refinance their home if they can’t get an interest rate lower than her current rate. Thus, by default, the flood of homeowners looking to refinance slowed to a stream and, if rates keep going up, will slow to a trickle, eventually. Now, that doesn’t mean that lenders aren’t any less busy—interest rates are still good and demand is still very high, so homebuyers are still jockeying for position in a seller’s market. But the good news for many borrowers (and real estate agents!) is that lenders are more and more turning their primary focus back to home purchases.

With this market shift comes a renewed opportunity for lenders and borrowers across the nation to take advantage of down payment assistance programs.

Another result of the housing boom are rapidly climbing housing prices. Many would-be buyers, even ones that had been saving for a down payment for years, find themselves further from affording a home than where they had started. As interest rates rise, things just look worse and worse to many. Fortunately, CBC Mortgage Agency offers Chenoa Fund down payment assistance and provides up to 5% assistance to help qualified borrowers buy a home, get into it now, and take advantage of good interest rates and housing prices before they get any higher.

To learn more about CBC Mortgage Agency and its down payment assistance offering, visit our website and information pages (Lender, Realtor, Homebuyer).

CBC Mortgage Agency™ – NMLS 1186381

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Illinois Residential Mortgage License #MB.6761292. Illinois Department of Financial and Professional Regulation, Division of Banking, 100 West Randolph, 9th Floor, Chicago, IL 60601 – 1-888-473-4858. Georgia Residential Mortgage Licensee, License # 1186381