Refinancing fails to hit potential

Refinancing fails to hit potential

The refinancing wave that swept the nation when mortgage rates hit historic lows last year is petering out, leaving behind millions of homeowners who could not qualify for the best rates.

Half of the nation’s borrowers have mortgages with rates above 6 percent, even though the average rate on 30-year, fixed-rate mortgages has been about 5 percent for most of the past year, according to research firm First American CoreLogic. More refinancing activity would have helped not only household budgets, but also the national economy, because homeowners might have spent some of the extra cash they pocketed, giving the recovery an added lift.

Many borrowers who tried to refinance have found they’re stuck because the value of their homes has tumbled and their equity has melted away. Others have been shut out because lenders tightened their requirements, demanding stellar credit and low debt. It’s especially frustrating for many now that interest rates are expected to rise.