Why Lower Mortgage Rates Won't Make Refinancing Popular Again

Mortgage rates have fallen in 2014, but it won't be enough to bring back a refinancing boom. Find out why.

Feb 2, 2014 at 2:21PM

In a surprising move, mortgage rates have actually fallen in 2014. That has some wondering if the decline in refinancing activity that Wells Fargo (NYSE:WFC), JPMorgan Chase (NYSE:JPM), and other banks have seen will reverse itself, but there are good reasons why refinancing won't get popular again.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, explains why mortgage refinancing probably won't pick back up in the near future. Dan acknowledges that higher rates crushed refinancing activity and that lower rates generally encourage people to refinance their mortgages. But Dan notes that most people who could refinance already did so at much lower rates than are currently available. With low rates only helping those who bought their homes very recently, Dan concludes that Bank of America (NYSE:BAC), Citigroup (NYSE:C), and other mortgage lenders will have to rely on new-home financing for the time being.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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