The refinance wave keeps rolling
Applications for refinance mortgages increased 1% in the week ending Nov. 6, accounting for 70% of total mortgage applications, up from 68.7% the previous week, the Mortgage Bankers Association (MBA) reported Wednesday.
“The refinance index climbed to its highest level since August,” says Joel Kan, the trade group’s forecaster. Plus, refi loan requests soared 67% compared to the same week in 2019.
The MBA’s mortgage rates survey shows 30-year fixed-rate loans hit another new low last week, as the average rate decreased to 2.98% from 3.01% a week earlier.
Persistently declining rates since March have had refis soaring, but overall mortgage applications still dipped by 0.5% for the week, the MBA says.
Applications for new mortgages, to buy homes, sank 3%.
Rising prices hamper homebuyers
“Homebuyer demand is still strong overall, and activity was up 16.5% from a year ago,” says Kan. “However, inadequate housing supply is putting upward pressure on home prices and is impacting affordability.”
This is especially true for first-time buyers and lower-income buyers, he adds. A trend toward larger average loan application sizes shows the strength in the upper end of the market.
But the pull of rock-bottom rates has generally kept the housing market active, says Danielle Hale, chief economist at Realtor.com.
"Lower rates give homebuyers more bang for their buck, which is a needed advantage in today’s housing market," she says.
In a competitive market, experts say buyers should gather and compare at least five rate quotes to find the best deal — because rates can vary sharply from one lender to the next.
Higher rates on the horizon?
Drugmaker Pfizer’s announcement on Monday has raised hopes that a COVID-19 vaccine could be just months away, and the result has been an upswing in interest rates.
Pfizer said its shot appears to be 90% effective in stopping the virus. Investors jumped at the news, imagining an economy that returns to normal in 2021.
As the interest on Treasury bonds surged, rates on 30-year home loans increased to an average 3.01% by Tuesday, according to Mortgage News Daily’s survey of lenders — a jump from 2.89% on Friday.
But rates remain extraordinarily low by historical standards, and homeowners still have a big incentive to refinance.
Some 18.5 million mortgage holders are in a prime position to refi and save around $300 monthly, the mortgage data firm Black Knight said last week. Good refinance candidates include those with solid credit scores and at least 20% equity in their homes.
Whether you’re a homeowner or homebuyer, the same comparison shopping skills that help you get a low mortgage rate also come in handy when you’re buying or renewing your homeowners insurance.
Go online and check rates from several insurance companies, to make sure you’re paying the lowest rate possible on the coverage you need.