Homeowners are continuing to find that they might save money by refinancing even if they have an existing mortgage taken out just last year.

Mortgage applications increase

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Mortgage applications overall rose 3.8% last week, the Mortgage Bankers Association reported Wednesday.

Applications for refinance loans led the way higher as they jumped 9% from a week earlier and soared 146% versus a year ago. In other words, lenders dealt with about two and a half times as many refinance applications they did during early December 2018.

The number of refi applications had fallen 16% over Thanksgiving week. Refinances accounted for a solid 62.4% of all mortgage applications last week, up from 59% the previous week.

The amount of mortgage purchase applications — for loans to buy homes — slipped 0.4% last week compared to a week earlier but were 5% higher than last year.

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

The impact from mortgage rates

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There's a simple reason for the increase in mortgage applications, says Joel Kan, associate vice president of forecasting for the Mortgage Bankers Association.

"Low mortgage rates continue to be the trend as 2019 comes to an end, and mortgage applications responded accordingly last week," Kan says.

Rates this month are the lowest for any December since 2012, MoneyWise.com has found.

Mortgage rates held steady in last week's survey from mortgage giant Freddie Mac, with 30-year fixed-rate mortgages unchanged at an average 3.68%. Rates on 15-year fixed-rate home loans — which are a popular refinance option — slipped to an average 3.14%, from 3.15% one week earlier.

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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Kan says low mortgage rates have contributed to "gradual growth" this year in loan applications to buy houses. Last week's encouraging economic news should prompt more people to make offers.

"The November jobs data showed increased payroll gains and low unemployment, which means conditions remain favorable for steady purchase growth in the coming months," says Kan.

The government reported that the nation's unemployment rate fell back to 3.5% last month, tying a 50-year low. And, employers added a stunning 266,000 jobs to their payrolls.

The outlook for mortgages

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Freddie Mac will be out with fresh mortgage rate numbers on Thursday. The company has forecast that the benchmark 30-year mortgage rate will stay around 3.7% through the end of the year and will rise just slightly in 2020, to an average 3.8%.

Federal Reserve policymakers have done their part. They cut interest rates three times this year, though they held rates steady during their final meeting of the year on Wednesday.

While mortgage rates have moved a little higher in recent weeks, they remain dramatically lower than they were last year at this time.

On average, you can get a 30-year mortgage more than one full percentage point below the rates offered in late 2018, and Freddie Mac has said refinancers this year have been saving about $1,700 a year in interest costs.

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

About the Author

Doug Whiteman

Doug Whiteman


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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