Mortgage rates have fallen to historic lows in recent years, giving many homeowners an opportunity to save money by refinancing their loans — an opportunity blacks and low-income homeowners have been unable to take advantage of due to various obstacles.

According to a report released this month by the Federal Reserve Bank of Philadelphia, black and low-income homeowners have not reduced their monthly mortgage payments because differences in financial literacy and knowledge of refinancing opportunities, financial stability, and target audiences of financial institutions mean that odds mean that fewer of these homeowners complete applications.

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The number of home loan refinances in New Jersey, Pennsylvania and Delaware in 2020 was more than 200% higher than the average for the previous two years, according to the report, “but this growth was not evenly distributed across groups,” said Kyle DeMaria, author of the Report and Research Associate for Community Development at the Philadelphia Fed.

The growth rate for refinancing for Black and low- and middle-income homeowners was one-half to three-quarters the growth rate for borrowers as a whole. Low- and middle-income households are households that earn less than 50% and less than 80%, respectively, of the area’s median income. That’s $47,250, or $75,600 for a family of four in the greater Philadelphia area.

Fewer blacks and low- and middle-income homeowners were applying for mortgage refinance, according to the Philadelphia Fed report, increasing inequality.

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Homeowners in these groups who applied for refinance were also rejected at higher rates than applicants overall, although their rejection rates fell in 2020. Financial institutions were most likely to reject black applicants because of insufficient or poor credit history. They were most likely to turn down low- and middle-income applicants because they had too much debt relative to their income.

During refinancing booms, lenders with limited staff may be more likely to favor borrowers with higher credit quality whose loans are easier to process, said Lauren Lambie-Hanson, senior advisor and research fellow at the Philadelphia Fed’s Consumer Finance Institute.

Financial institutions and organizations that assist homeowners could help them improve their credit scores, manage debt and put them on the right path to access opportunities, DeMaria said.

According to a 2021 report by the Federal Reserve Banks of Atlanta, Boston, and Philadelphia, homeowners with federally-backed mortgages who refinanced a new 30-year mortgage in 2020 saved an average of $280 per month.

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Homeownership is relatively more expensive for black households compared to white households due to employment and income inequalities. According to Philadelphia Fed researchers, the median household income for black homeowners in Philadelphia is about $47,000, while the median household income for white homeowners in Philadelphia is nearly $78,000.

In the past, homeowners with higher incomes and credit ratings — who tend to be white — were much more likely to take advantage of falling interest rates to refinance their mortgages.

According to the 2021 report, black and Hispanic borrowers across the country were significantly more likely than white borrowers to miss payments due to financial problems and were significantly less likely to refinance their loans to lower their payments in 2020 . Between January and October 2020, among homeowners with government-backed mortgages, about 6% of black borrowers and 9% of Hispanic borrowers refinanced, compared to 12% of white borrowers.

» READ MORE: Becoming a homeowner is no easier for black Philadelphians today than it was 30 years ago

Black and Hispanic workers were also more likely to lose their jobs than white workers during the pandemic.

“These gaps have been created by these groups that have been particularly hard hit by the pandemic [in refinancing] even larger than we would normally have expected,” said Lambie-Hanson, co-author of the 2021 report.

To refinance, applicants must keep their mortgage payments on track and be able to afford closing costs, which are typically 1% of the mortgage balance plus $2,000. With home values ​​soaring, most homeowners have the equity to refinance. However, this has to make sense in terms of how long homeowners plan to stay in their home and potential savings.

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The average interest rate on 30-year fixed-rate mortgages fell to a record low of 2.65% in January 2021, compared to the pre-pandemic rate of 4%. The average interest rate on a 30-year home loan last week was 3.76%.

The number of refinanced home loans across the country continued to fall in late 2021 as interest rates have risen, and many eligible homeowners have already applied. Refinancings were down 11% from the third quarter and 23% year over year, according to real estate data provider Attom. The annual drop is the largest drop in three years, Attom said.

Refinanced loans still make up the majority of home loans — 55% of mortgages in the last quarter of 2021. However, that share has declined from 62% in the fourth quarter of 2020.