Demand for mortgages skyrockets

fireworks from a house
Rambaud Julien / Shutterstock
Low mortgage rates have kicked off fireworks in home lending.

Overall mortgage applications soared 30.2% in the week ending Jan. 10, the Mortgage Bankers Association says.

Leading the way was a big spike in refinances. Homeowners applied for 43% more of those than they did the previous week, and last week's refi applications were up 109% from a year earlier — meaning lenders got more than double the number they received during the first full week of January 2019.

Mortgage "purchase applications" — for loans to buy homes — jumped 16% last week to a level not seen since 2009.

Still, refinances accounted for 62.9% of all mortgage activity last week. You can compare refi offers from multiple banks by visiting LendingTree.

"It remains to be seen if this strong refinancing pace is sustainable," Kan says, "but even with the robust activity the last two weeks, the level is still below what occurred last fall."

Translation: Some homeowners who could be refinancing are missing out.

Applications rise as mortgage rates stay level

Arrow down and house with money on white wooden background. Falling market price of real estate.
ADragan / Shutterstock
Mortgage rates are down at levels not seen in months.

Borrowers rushed to sign up for home loans after mortgage rates fell to their lowest levels in three months, according to the weekly survey from mortgage giant Freddie Mac.

Current average mortgage rates

Loan Type Interest Rate
30-year fixed-rate mortgage 3.26%
15-year fixed-rate mortgage 2.73%
5/1 adjustable-rate mortgage 3.17%
Source: Freddie Mac Primary Mortgage Market Survey, May 7, 2020.

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Interest rates were weighed down last week by the U.S. tensions with Iran. As investors sought safety in U.S. Treasury bonds, bond prices went up — and their yields, or interest rates, fell. Mortgage rates tend to follow the track of the 10-year Treasury note.

Rates stayed relatively constant this week, with 30-year fixed-rate mortgages averaging 3.65% — not much higher than 3.64% a week earlier. On 15-year fixed-rate home loans — a popular option for refinances — rates stay similarly flat with an average 3.09%, up by a couple notches from 3.07% last week.

Homeowners might find they'll save money by refinancing, even if their current mortgage is from 2018.

Use this calculator to see how a refinance could cut your monthly mortgage payment:

The outlook for mortgages

Couple with real-estate agent visiting modern house
goodluz / Shutterstock
Low rates are helping to bring out the buyers.

Freddie Mac reported that rates stayed flat since last week. Treasury yields have been falling this week, which suggests mortgage rates will keep tumbling lower.

Kan says that will help fuel something real estate agents have already been reporting: a super-early start to the spring homebuying season. It's a major reason for the pop in mortgage purchase applications.

"Low rates and the solid job market continue to encourage prospective buyers to enter the market," he says.

The government reported last Friday that the U.S. unemployment rate remained at a 50-year low of just 3.5% in December as employers added 145,000 new jobs.

Freddie Mac is forecasting that 30-year mortgage rates will remain low throughout 2020, averaging just 3.8% this year.

Check out today's best mortgage rates where you live.

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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