Mortgage refinance candidates spike by over 2.3 million in June

As 30-year fixed-rate mortgages continue dipping below 4%, June had the most borrowers to qualify for refinancing since late 2016, according to Black Knight's Mortgage Monitor.

The curve of refinance candidates — measured as those who would save at least 75 basis points in the interest rate on their loan — inclined steeply over the second quarter, going to 8.24 million in June from 5.9 million in May and 3.9 million in April. June's surge stands head and shoulders above the year prior, when refinance candidates totaled about 2.3 million.

The month's candidates would have an aggregate savings of $2.2 trillion or an average of $266 per borrower based on mortgage rates as of June 27. The lower interest rates helped with affordability and boosted prepayment activity as well.

"Overall, prepayment activity — largely driven by home sales and mortgage refinances — has more than doubled over the past four months," Ben Graboske, executive vice president of data and analytics at Black Knight, said in a press release. "It's now at the highest levels we've seen since the fall of 2016, when rates began their steep upward climb."

Prepayments jumped across almost all investor and loan types, but ARM speeds hit the highest level since 2007 as borrowers pursued low fixed rates. All vintage years experienced similar activity; in particular prepays for mortgages originated in 2018 swelled by 300% since March.

"As of June 27, there were 1.5 million refinance candidates from the 2018 vintage alone, accounting for one of every six such candidates in the market, matching the total from the 2013-2017 vintages combined," Graboske said. "All in all, some 8.2 million homeowners with mortgages could now both benefit from and likely qualify for a refinance, including more than 35% of those who took out their mortgages just last year."

The heightened activity and amount of refinance candidates may not be done booming in 2019.

"Given that interest rates have fallen further from May to June — and that we've yet to see the calendar year peak in terms of housing turnover related-prepayments — we may very well continue to see rising prepayment activity again in June's mortgage data," Graboske continued.