Mortgage applications dip
Mortgage applications decreased 4.2% for the two weeks ending Jan.1, the Mortgage Bankers Association (MBA) reported Wednesday.
Requests dropped across the board, with refinance applications decreasing 6%, and demand for new mortgages — called “purchase loans” — falling 0.8%. The MBA says results include adjustments to account for the holidays.
Rates for 30-year fixed-rate mortgages lingered near the MBA survey’s record low, falling to 2.86%, from 2.90% — just a hair above the record set in mid-December.
"Despite these low rates, overall application activity fell sharply during the holiday period — which is typical every year,” says Joel Kan, the MBA’s forecaster.
But refi requests were still booming, coming in at exactly double the pace of the same week a year ago.
Beware of rising rates
We may not see record-low rates much longer, because of possible Democratic victories in Tuesday's pair of Georgia runoff elections that could flip the balance of power in the U.S. Senate.
“If Democrats win both seats, then one party will control Congress and the presidency,” explains Matthew Graham, chief operating officer of Mortgage News Daily. “Any time one party has full control, it's easier for the government to spend money.”
It might start with yet another spending package to help the pandemic-ravaged U.S. economy. More government spending would mean more government borrowing — and investors are already reacting to that likely scenario by pushing the interest on the 10-year Treasury note above 1% for the first time since March.
When bond yields rise, mortgage rates typically do, too.
Would-be borrowers may want to spring into action, especially homeowners who’ve been putting off refinancing. More than 19 million mortgage holders could save an average $308 per month by refinancing now, according to mortgage technology and data provider Black Knight.
How to slash your mortgage bill
If you have a solid credit score and at least 20% home equity, you can grab an ultra-low rate while they’re still around.
The best way to get a rock-bottom rate is by shopping around. When you compare a minimum of five rate quotes, studies show, you can save thousands of dollars over the life of your loan.
Be sure to ask your lender to lock your rate. Studies show it can take nearly two months to complete the closing process — and mortgage rates could balloon in that time. By locking the rate your lender quotes you, the interest on your loan is guaranteed, usually for 30-60 days.
And if you move too slowly to take advantage of the lowest rates in history, you can still cut your housing costs when it’s time to buy or renew your homeowners insurance. Use your comparison shopping skills and get quotes from several companies, to find the best price on your coverage.