The Mortgage Bankers Association tells us that the number of mortgage applications to refinance home loans is now -32% lower than it was one year ago. In fact, there are now fewer mortgage applications to refinance than there has been since 2008.

This year alone, according to Black Knight Financial Services that specializes in the mortgage and real estate industries, some 2.2M homeowners who could have benefitted from refinancing did not apply. In 2016, 5.9M who could have benefitted did not apply for refinancing.

Ben Graboske, executive vice president of Black Knight’s data and analytics division, said, “All told, this amounts to an aggregate of +$1B in lost savings every month for these borrowers.”

The number of borrowers who could have benefitted from refinancing this year alone dropped by 56%. On average, this 56% missed out on an average monthly savings of $252/month.

Now that mortgage rates have increased by nearly one full percentage point since the start of this year, just under 1.9M borrowers who could likely qualify still have an incentive to refinance. (Borrowers who have high FICO scores and at least 20% equity in their homes are likely candidates to qualify.) If rates continue to rise as expected, borrowers will have less incentive to refinance.

Additionally, if rates continue to rise as expected, homeowners will have less incentive to move. Trading a rock bottom mortgage rate for a significantly higher mortgage rate on a new home just doesn’t make sense. Similarly, rising rates are making it more expensive to buy a home. The monthly principal and interest payment needed to buy an average-priced home now costs $190/month more than it cost at the beginning of this year.

This +18% jump in monthly principal and interest payments translates into 23.6% of a borrower’s median income, according to Graboske of Black Knight. “This (jump) makes housing less affordable than it has been in nearly a decade. While this 23.6% of a borrower’s median income is still better than the average of 25.1% from 1995 – 2003, we’re close to a tipping point.”

At the beginning of 2018, only California and Hawaii were less affordable than their long-term norms. Now, 10 states are less affordable. Additionally, 6 more states are within 1$ of their long-term affordability levels.

Black Knight is not optimistic about 2019 affordability rates. Prices continue to rise in most markets and interest rates are expected to continue rising. This more and more reality equals less and less affordability.