On April 5, 2024, the CFPB issued a report finding that more borrowers paid “discount points” upfront as overall interest rates rose. According to the CFPB, the percentage of homebuyers paying discount points roughly doubled from 2021 to 2023.
From CFPB Director Rohit Chopra statement:
“Higher interest rates on mortgages have led borrowers to pay upfront fees to lower their interest payments. The heavy use of 'discount points' suggests that many borrowers are uncertain about their ability to refinance in the future.
Discount points are a one-time fee paid at closing to a lender in exchange for a lower interest rate. Paying one discount point is the equivalent of paying a fee of one percent of the loan amount. However, discount points have no fixed value in terms of the change in interest rate according to the CFPB. In its report, the CFPB found that:
The majority of recent borrowers paid discount points, including nearly 9 out of 10 borrowers with cash out refinances;
More borrowers paid discount points as interest rates increased; and
Borrowers with lower credit scores were more likely to pay discount points.
Read the CFPB’s press release here.
The full report can be found here.
