Homebuyers shop and borrow, drawn by low rates
Overall mortgage applications inched up 0.1% last week, but demand for "purchase loans" — to buy homes, as opposed to refinancing — jumped 6%, the Mortgage Bankers Association, or MBA, said Wednesday.
That happened as the average for a 30-year fixed-rate mortgage sank to yet another record-low in the trade group's weekly survey, this time 3.40%.
"Historically low mortgage interest rates are the anchor keeping the market stable," says Corey Burr, senior vice president with Sotheby's International Realty in Chevy Chase, Maryland. "Without these rates, most active buyers would probably remain on the sidelines."
Plus, as states ease their COVID-19 restrictions, pent-up demand to buy homes is being unleashed, says Mike Fratantoni, the MBA's chief economist.
"Purchase volume increased for the third week in a row, led by strong growth in Arizona, Texas and California," Fratantoni says.
In California, mortgage applications from homebuyers shot up 10.1% last week and 17.2% the week before, according to MBA data.
Nationwide, the pandemic and the lockdowns crushed what might have been a solid spring homebuying season. But Burr says the housing market should make up its lost ground.
"I expect we will see demand stretch deeper into the summer and fall months this year," he says.
If you're thinking about buying a home, use the calculator below to see how affordable your payments can be with one of today's low rates.
Refinancing slows a bit
Applications for mortgage refinance loans slipped 2% last week, the mortgage bankers say.
"Despite lower rates, refinance applications dropped, as many lenders are offering higher rates for refinances than for purchase loans," says Fratantoni.
But demand for refi loans was up 210% compared to the same week a year ago. Put another way, applications were more than triple what lenders were dealing with during late April of 2019.
Still, refinances fell to 70% of all mortgage applications last week, from 71.6% the previous week.
If you're a homeowner and haven't refinanced yet, a refi can save you a lot of money, even if your current mortgage is relatively young. When you refinance a loan taken out just one year ago, you can cut your monthly payment by $60 for every $100,000 you borrow, LendingTree recently reported.
Burr is hoping interest rates will remain low and won't be pushed up by all the borrowing the government has been doing to pay for stimulus checks and other coronavirus relief for Americans.
"Many homeowners have refinanced into super-low 30-year, fixed mortgages, and [if rates do take off] it will take great motivation for them to abandon those loans if they do plan to buy new properties with a higher-rate mortgage," he says.
To find a super-low refinance rate, shop around. Gather mortgage offers from at least three lenders and compare them, because some lenders' rates can be much higher than what others are offering — even when surveys show average rates are at record lows.
Take a look at today's best mortgage rates where you are: