Rates drop, but mortgage applications hold steady

Businessman holding the down arrow on wooden blocks with the word Rate and house. Low interest in mortgages. Reducing interest payments for mortgage. The fall in housing rates on credit.
Andrii Yalanskyi / Shutterstock

Mortgage applications slipped 0.7% in the week ending Oct. 9, with demand for refinance loans inching down by 0.3%, the Mortgage Bankers Association (MBA) reported Wednesday. Refi loans accounted for 65.6% of total mortgage applications, up slightly from 65.4% during the previous week.

Requests for refinance loans are still sky-high compared to last year. Applications surged 44% compared to the same week in 2019, thanks to the cheapest mortgage rates on record.

Rates hit a record low for the third week in a row in the MBA’s weekly survey, as the coronavirus pandemic continued to spook investors. Rates on 30-year fixed-rate mortgages dipped to an average 3%, down slightly from 3.01% a week earlier.

On Thursday, the nearly 50-year-old weekly survey from mortgage giant Freddie Mac also put 30-year rates at a new all-time low: an astonishing 2.81%, on average.

In the MBA report, applications for new mortgages (or “purchase loans”) decreased by 1% from the previous week, but were up 24% from a year ago.

"Refinance and purchase activity continue to run well ahead of last year's pace, fueled by record-low rates and strong homebuyer demand,” says Joel Kan, the MBA's forecaster.

Borrowing should continue to stay strong the rest of the year, Kan adds, even as a shortage of homes for sale continues to be a challenge for aspiring buyers.

Relief could be on the horizon, says Realtor.com chief economist Danielle Hale. She points to a recent Freddie Mac survey that found, for the first time since February, that more people think it’s a better time to sell a home (56%) than buy (54%).

“If increasing seller sentiment leads to more sellers, that will ultimately be a good thing for home buyers,” says Danielle Hale, chief economist at Realtor.com.

A refi clock is ticking

African American father gave piggyback ride to his little daughter with happy mental health and having a good time together while walking outside the house around the neighborhood
Akarawut / Shutterstock

If you’re a homeowner and haven’t refinanced yet, you’re missing out on a huge chance to save, experts say. Because of the historically low mortgage rates, more than 19 million homeowners could cut their monthly payments by an average of around $300 through a refi, says data firm Black Knight.

Refi rates can vary widely from one lender to the next, so it's crucial that you shop around. Compare a minimum of five rate quotes from different lenders. According to one Freddie Mac study, borrowers who shop around to five lenders can save about $3,000 over time compared to someone with only one offer.

Good refi candidates — those with a solid credit score and at least 20% home equity — need to hurry to lock in the best rates while they can, before a new 0.5% fee on refi loans goes into effect Dec. 1. Some lenders already have started to pass it along to borrowers in the form of higher mortgage rates.

Freddie Mac and Fannie Mae — government-sponsored mortgage giants that buy most U.S. home loans from lenders — say COVID-19 has made the fee necessary, as the companies look to offset losses related to the pandemic.

Already refinanced? You can save even more money when your homeowners insurance comes up for renewal, by using your comparison shopping skills to get the right coverage at the lowest possible rate.

About the Author

Ethan Rotberg

Ethan Rotberg

Reporter

Ethan Rotberg is a staff reporter at MoneyWise. His background includes nearly 15 years as a writer, editor, designer and communications professional. He loves storytelling, from feature writing to narrative podcasts. His work has appeared in the Toronto Star, CPA Canada and Metro, among others.

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