Why Your Bank Wants You to Refinance

A potential home buyer walks through a five-bedroom row house for sale in the Logan Circle neighborhood of Washington, D.C. Photograph by Andrew Harrer/Bloomberg

Nearly 80 percent of all mortgage applications are for refinancing now, according to the Mortgage Bankers Association, a near-record level. Why is the figure so high? Two reasons. First, demand for refinancings is up because homeowners want to take advantage of the historic low interest rates to reduce their monthly payments. Second, there are still very few new purchases as the housing market tries to recover. “When rates go down, it doesn’t spur homebuying, it spurs refinancing,” says Guy Cecala, publisher of Inside Mortgage Finance.

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