Mortgage applications jump, led by a refi surge

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Homeowners have been only too happy to refinance and save.

Mortgage applications rose 6.8% in the week ending Sept. 18, driven by a 9% increase in refi requests, the Mortgage Bankers Association, or MBA, reported on Wednesday. Refinances also increased to 64.3% of total mortgage applications, up from 62.8% the previous week.

Compared to a year ago, refinance applications are up a whopping 86% as homeowners continue to benefit from mortgage rates that cratered during the coronavirus crisis.

The mortgage data firm Black Knight recently calculated that 19.3 million mortgage holders were in a good position to refinance at a much lower rate — and save an average $299 a month.

You're considered a good refi candidate if you have a solid credit score and at least 20% home equity (that is, the share of your home's value that you've paid off).

Demand for purchase loans — to buy homes — increased by 3% from the previous week, the MBA says, and was up 25% from the same week one year ago.

"The strong interest in homebuying observed this summer has carried over to the fall,” says Joel Kan, the MBA's forecaster. Coronavirus lockdowns during the spring caused the peak homebuying season to stretch late into this year.

Mortgage activity was healthy last week, though 30-year and 15-year fixed mortgage rates increased to their highest levels since late August, Kan says.

The mortgage bankers say their survey shows rates on 30-year loans rose to an average 3.10% last week, from 3.07% a week earlier.

New refi fee casts a shadow

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A new mortgage refinance fee is pushing rates higher.

Homeowners who've been waiting to refinance their mortgages may need to hurry to lock in the best rates.

A new 0.5% fee on refi loans technically goes into effect Dec. 1, but many lenders have already 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.

But there's still time to get a great refinance rate, because it's not too difficult to find 30-year refi loans at under 3%, and even far below 3%.

To find the lowest rate you can get, get a minimum of five rate quotes and compare them. A Freddie Mac study found that a borrower who shops around to five lenders pays an average of about $3,000 less over time than someone with only one offer.

Make sure you request a rate lock when you submit your mortgage application — to protect yourself in case rates spike.

Then, keep your comparison shopping skills handy for when your homeowners insurance comes up for renewal — so you can make sure you've got the right coverage at the lowest possible rate.

Take a look at today's top mortgage rates where you are:

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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