A recent decline in interest rates has increased refinance incentive by 50% in two months as one million more homeowners could now benefit from a refi.

According to the latest data from Black Knight, there are now 2.9 million homeowners who could reduce their interest rates by at least 0.75% by refinancing their mortgage. This is largest number of refi candidates since January 2018.

Black Knight attributes this jump in refi potential to the fact that 30-year mortgage rates fell below 4.5% in January – a low it hasn’t seen since April 2018.

While it noted that refi market potential is still down 40% from the start of 2018, Black Knight said the current climate still could mean lenders will see a notable spike in activity.

“Even if rates should hold steady – and certainly if they fall further – this could lead to an unexpected bump in refinance volumes in early 2019,” it stated.

With HELOC rates rising, Black Knight also said the market may see a spike in cash-out refis in early 2019 from homeowners looking to tap their equity.

But will increased incentive for more borrowers translate to more volume? Maybe not.

About 90% of refi incentive applies to loans that were originated prior to 2011, the report noted, with 40% coming from loans dating from 2009-2011.

“A large portion of these homeowners have already had, but not acted upon, interest rate incentive to refinance in recent years, when rates were even lower,” the report noted. “This suggests the impact of incentive gains may be more limited than the numbers suggest.”

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