A somewhat American problem, A lot of the rest of the world has more variant mortgage rates over the life of a mortgage and re-financing is common. Typically people hedge inside their mortgage with a fixed period when they can (at low rates) or a partial fix of some of the loan.
Is refinancing out of high rates uncommon in the USA? Why would somebody stay locked into 7% for 30 years, if they could shift down when the longterm rate moves? What I read says it can cost 5% or more of the loan value. It's nothing like that expensive to refinance outside of the USA so this must be the vig to make long-lived mortgage finance "work" for the market.
People can refinance when rates come down but who knows when that will be. The cost of the refinance can vary based upon the equity in your home and a few other factors. One of the most common things people do when they refinance at a lower rate is take all of the equity they can out of their home in order for home improvements or other such things. Debt consolidation into your mortgage is also a thing that people do. This is one of the reasons why you see the refinance fee being so high is because they're not simply refinancing the remaining amount to get a lower interest rate they're taking a reappraisal on the house so they can get an overall larger loan at a lower rate.
See, this is a huge difference with life here. You can refinance in Australia for the cost of drawing up the loan docs. Not a % of the life of the mortgage left and it's size. The cost of doing paperwork is a constant mostly. The penalty for a fixed interest buy out is there, but it's nothing like 30 years penalty. I guess if we had a 30 year fix the penalty would be commensurate.
"appraisal" doesn't exist here either, as it does in the US. it's different.
So maybe I didn't communicate this correctly. If you're simply refinancing as in getting another loan at a lower interest rate for the remaining principle of your current loan that's not very expensive. Unfortunately that's not what most people do. When they refinance a house they want to get it appraised for its current market value and get a new loan at the current market value for another 30 years at the lower rate. This gives them cash to consolidate other debts or do home improvements or all kinds of other things. That kind of refinancing is very common here in the USA and it is considerably more expensive. It is effectively all of the loan origination costs you get when you're buying the house.
Mortgage rates are tied to US treasury rates (with a risk premium). The bond market is pricing an increased term premium into longer term US debt (which is getting unwieldy) as well as incoming admin inflationary policy (tariffs, tax cuts). This pushes up mortgage rates. This makes refinancing at lower rates infeasible for the foreseeable future, so if you’re going to buy, you have to be prepared to live with the payment for some time (which is driving down affordability and purchase transactions until sellers concede on price, which is a function of who must sell sooner than others, for whatever reason).
Right, I think I see this better now. Because the market(s) I was exposed to (UK & OZ) tend to variable rate mortgage as normal, we don't have this strong tie to a long lived fix for the whole of the asset: people get 5 or 10 year fix if they are lucky, at a good rate and if rates are high they take a short fix as a hedge and then look to refinance variable when things drop. It's just a different kind of market.
Probably, the lifetime of debt at known rate drives a kind of derivative investment which isn't so common in my lived experience. We do have broken housing models, maybe some of our choices feed the problem. But our problems aren't the same as US problems.
Is refinancing out of high rates uncommon in the USA? Why would somebody stay locked into 7% for 30 years, if they could shift down when the longterm rate moves? What I read says it can cost 5% or more of the loan value. It's nothing like that expensive to refinance outside of the USA so this must be the vig to make long-lived mortgage finance "work" for the market.