Lenders deal with a tsunami of refinancing
Overall mortgage applications surged 55.4% during the week ending March 6, the Mortgage Bankers Association reported this week, and refinance requests skyrocketed 79%.
It was the largest weekly increase in refis since November 2008, and compared to the same week in 2019, the volume of refinance applications was up an astounding 479% — nearly six times greater.
With so many homeowners taking out new loans, the mortgage bankers have doubled their forecast for refinance originations in 2020.
Applications for "purchase loans" — to buy homes — last week rose 7% and were up 12% from a year ago.
Borrowing is booming because mortgage rates have gone through the floor as financial markets remain in panic mode over the rapidly spreading coronavirus.
"As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now," says Joel Kan, associate vice president of forecasting for the Mortgage Bankers Association. "This in turn will support borrowers looking to refinance or purchase a home this spring."
Remember, if you're in the market for a home or a refi and you see a rate you like, lock it so you won't be kicking yourself if rates go higher.
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%|
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Mortgage rates stay down
Mortgage rates have risen just a couple of notches from last week's all-time low in the nearly 50-year-old weekly survey from mortgage company Freddie Mac.
The benchmark 30-year fixed mortgage rate climbed to an average 3.36% in the week ending March 12, up from the record-low 3.29% a week earlier, Freddie Mac announced Thursday. A year ago, those loans were averaging 4.31%.
Some major lenders that are overwhelmed by mortgage applications have pushed their rates much higher. A MoneyWise.com daily survey of four of America's largest mortgage lenders on Thursday showed their average rate for a 30-year fixed mortgage was 4.09%.
If you want to find the lowest rates out there, stick with smaller lenders that focus on mortgages, advises Alan Rosenbaum, founder and CEO of the New York-based mortgage lender GuardHill Financial Corp.
"We are seeing most banks raise their rates," Rosenbaum says. "Fortunately, as a mortgage specialist where mortgages are all that we do, our rates have not increased."
Rates on other popular types of mortgages are lower this week. The average for a 15-year fixed-rate mortgage has fallen to 2.77%, according to Freddie Mac. Last week, the typical rate for those loans — which are a popular refinancing option — was 2.79%. And one year ago, 15-year fixed home loans were averaging 3.76%.
Rates on 5/1 adjustable-rate mortgages are down for the sixth straight week. Those "ARMs" are fixed for five years and then can adjust up or down every year that follows.
Right now, ARMs are being offered at an average initial rate of 3.01%, way down from 3.18% last week. A year ago at this time, the starter rates on ARMs were at a steeper 3.84%, on average.