A new TransUnion survey has found that many consumers feel their existing mortgage and auto payments are putting a strain on their household finances, as the prospect of falling interest rates has them ready to consider refinancing those loans. TransUnion’s survey found that four in five recent home buyers say their mortgage payments are straining their finances, and are looking to refinance their mortgage payments in the next 12 months.
The surveys of consumers who have taken out a mortgage and auto loans in the last 24 months were conducted between September 18 and September 27, 2024. They resulted in responses from 1,002 and 1,025 auto and mortgage loan customers, respectively.
Mortgage Holders Feel the Strain
When asked about the biggest factor that would ultimately drive them to pull the trigger on a refinancing decision, 70% of these recent home buyers said that a more favorable loan term would be a key driver for them. However, a nearly identical percentage said that better interest rates (67%) and a cash-out refinance (61%) would also be significant drivers, reflecting broad economic interest.
“For many of these recent home buyers, their mortgage payment is their largest single payment each month,” said Satyan Merchant, SVP and Mortgage and Auto Business Leader for TransUnion. “The upside is that it is a payment that can be refinanced if the economic climate allows for it, and as interest rates begin to fall, this group of consumers should begin exploring this option. Conversely, lenders should be actively marketing to these refinance candidates, regardless of what their primary motivation to refinance may be.”
The research also explored the sentiment of consumers who have already refinanced despite the relatively high interest rates. Many of these borrowers derived lower payments through longer terms.
From this standpoint, TransUnion data shows that credit unions continue to lead the way with 67% of the refinance share in 2023. Banks had the second largest share, at 20%. These figures have remained relatively stable in recent years and underscore consumers’ favorable perception of credit unions when they begin exploring refinancing opportunities.
“Credit unions may be able to offer their members rates and service that larger more traditional banks cannot,” said Sean Flynn, Senior Director of Community Financial Institutions at TransUnion. “Credit unions should lean into this fact and leverage available tools such as trended data and advanced analytics to seek out those consumers who may be able to refinance.”
According to Zillow, the average U.S. home value is currently $359,892, up 2.7% year-over-year. In mid-September, for the first time in four years, the Federal Reserve slashed its benchmark interest rate to a new range of 4.75% to 5.0% at the conclusion of the Federal Open Market Committee (FOMC) meeting. The Fed had kept rates at an all-time 23-year high for more than a year. After mortgage rates initially fell once the Fed’s rate cuts were announced to near the 6%-mark, Freddie Mac reports the 30-year fixed-rate mortgage (FRM) averaged 6.54% last week. A year ago at this time, the 30-year FRM averaged more than a full percentage point higher at 7.79%.
Trends in Auto Loans and Mortgages Go Hand in Hand
The survey also examined consumer sentiment towards their existing auto loans, payments, and interest rates along with future plans regarding refinancing. Results indicated that there was a similar eagerness to refinance when interest rates eventually fall, and a similar response among consumers when asked if they feel that their current auto loan payments represent a strain on their household finances.
When asked the extent to which they agree that their current auto loan payment represented a strain on their personal finances, 65% of respondents indicated that they agree or strongly agree with this statement as opposed to 20% who disagree or strongly disagree. Nearly the same percentage of respondents, 63%, indicated that they were likely or very likely to refinance their existing auto loans if it could save them money on their monthly payments. 52% of respondents indicated they would consider refinancing if it would save them between $50 and $149 monthly.
Click here to access TransUnion’s full report, “Capturing the Refinancing Wave in Mortgage and Auto Lending.”
