A rising share of homeowners are prime refinance candidates

Potential refinance prospects for lenders have neared a decade-high.

Higher-for-longer mortgage rates have left 17.2% of the nation's homeowners with interest rates greater than, or equal to 6%, the highest share since 2016 according to Redfin. The 30-year fixed-rate mortgage has danced above 6% for the last two years, and many home shoppers have acquiesced to the new landscape. 

The share of high-rate holders has risen 5% since the third quarter of 2023, and the real estate brokerage suggests the share could double in the next 3 years with prolonged, elevated rates. The analysis didn't estimate how many millions of homeowners were represented by the shares.

Homeowners have shown willingness to jump on even the slightest rate drops to refinance, with an untold number of borrowers saddled with 7% and higher interest rates. They're also looking at new and active listings up annually, although Redfin suggested stale listings are piling up. 

The pent-up demand was also apparent last summer, when a 30-year FRM approaching a flat 6% generated a refi "boomlet." Refinance customers last year on average saved over a percentage point on their home loan, according to an ICE Mortgage Technology analysis. 

Still, 82.8% of homeowners have interest rates below 6%, Redfin found in its analysis of third quarter data from the Federal Housing Finance Agency's National Mortgage Database. While that share is 10 basis points lower than the mid-2022 landscape, the lock-in effect is still contributing to a sluggish market. 

Sub-6% rates are also likely far on the horizon. A Fannie Mae forecast last month suggested the 30-year FRM to end this year at 6.5%, and cut its refinance forecast by $33 billion. Experts however still anticipate this year's total origination volume to surpass 2024. 

Today over half of the nation's mortgage borrowers, or 55.2%, tout rates below 4%, Redfin found. Within that, 21.3% of homeowners have interest rates below 3%; that's however the lowest share since the second quarter of 2021.