Mortgage application volume still 'elevated'

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Mortgage demand remains "elevated," the Mortgage Bankers Association says.

Overall mortgage applications slipped 1.2% in the week ending Jan. 17, the Mortgage Bankers Association says.

"Mortgage applications dipped slightly last week after two weeks of healthy increases, but even with a slight decline, the total pace of applications remains at an elevated level," Kan says.

Refinance applications fell 2% but stayed near their highest level since October, says Joel Kan, the trade group's vice president of forecasting. And refi paperwork is coming in at more than double the rate (up 116%) from a year ago.

Homeowners are still finding they can save by refinancing, even if their current mortgage dates back only to 2018. You can compare refi offers from multiple banks with the help of LendingTree.

Refinance applications accounted for 61.6% of all mortgage activity last week. Meanwhile, "purchase applications" for loans to buy homes also were down 2% last week, but demand stayed robust.

"The purchase market has started 2020 on a strong note, running 8% higher than the same week a year ago," says Kan.

Americans have revved up their homebuying during what's normally a slow time of year for the housing market. The National Association of Realtors is reporting that sales of previously owned homes jumped 3.8% from November to December and hit a level not seen in nearly two years.

Low mortgage rates keep borrowing bustling

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Mortgage rates are down at levels not seen in months.

Bargain-basement mortgage rates — including some of the lowest rates on 15-year mortgages since November 2016 — are keeping lenders busy, says Kan. Rates are staying down as investors continue pouring their money into U.S. Treasury bonds.

"Even with more positive developments surrounding the U.S. and China trade negotiations and healthy retail sales data, investors seemed cautious and maintained their demand for safer U.S. Treasuries, which kept their yields lower," Kan says. "Our expectation is that rates will stay along this same narrow range."

Mortgage rates tend to follow the track of the yield, or interest rate, on the 10-year Treasury note.

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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Rates have been holding firm around their lowest levels in months, says mortgage company Freddie Mac. Freddie Mac's latest survey has 30-year fixed-rate mortgages averaging 3.65%, up slightly from 3.64% a week earlier. On 15-year fixed-rate home loans — a popular refinance option — the current average is 3.09%.

Use this calculator to see the kind of monthly mortgage payment you can expect from today's low mortgage rates:

The outlook for mortgages

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Rates will remain low and continue to drive home sales.

Mortgage rates are expected to stay in the cellar this year, to the delight of homebuyers and homeowners.

A new forecast from Freddie Mac's corporate sister, Fannie Mae, looks for 30-year mortgage rates to average just 3.7% throughout 2020 — down from an average 3.9% last year.

"There’s no evidence in the market today that interest rates will go anywhere near where they were, say in the late 1970s or early '80s," Doug Duncan, Fannie Mae's chief economist, said in an interview with MoneyWise.com.

"Mind you, today’s mortgage rates of 3.5 to 3.75% are very low historically," he notes. "The average from World War II to today is about 6%."

But low mortgage rates are only part of the formula for a healthy housing market. Buyers are encountering a severe shortage of homes for sale: The National Association of Realtors says there's just a three months' supply of single-family homes on the market, the worst crunch since 1982.

But homebuilders are working to meet the demand. The government recently reported that new construction soared 16.9% in December, compared with the pace in November.

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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