Applications swell amid record-low rates

pen and key on mortgage application form
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Mortgage applications grew 1.7% for the week ending Oct. 23, driven by persistent demand for refinances, which climbed another 3%, the Mortgage Bankers Association (MBA) reported Wednesday. Refi loans accounted for 66.7% of total mortgage applications, up from 66.1% the previous week.

Months of dirt-cheap mortgage rates have had refinance requests soaring. Those applications have jumped an astonishing 80% from a year ago, the MBA says.

Mortgage rates bottomed out again last week in the trade group’s survey, with 30-year fixed-rate loans averaging just 3%. That matches a recent all-time low and is down from 3.02% a week earlier.

Rates also were at a record low last week in the long-running survey from mortgage giant Freddie Mac, which had 30-year mortgage rates averaging just 2.80%.

Cellar-dwelling rates make a strong case for homebuying

Colorful line of single homes in great neighborhood. The homes  in north America.
romakoma / Shutterstock

Record-low rates continue to power a homebuying frenzy, with sales increasing for the fourth consecutive month in September, according to data from Realtor.com.

Even so, applications for new mortgages — or “purchase loans” — are relatively flat; they ticked up 0.2% last week after weeks of decline. But demand was 24% higher than during the same week in 2019.

Amid rising home prices and tight supplies of starter homes, the MBA says the average loan size has reached a record $372,600.

“These results highlight just how strong the upper end of the market is right now, with outsized growth rates in the higher loan size categories,” says Joel Kan, the MBA's forecaster.

Experts say homebuyers looking to bag a great mortgage should gather and compare at least five rate quotes — because rates can vary widely from one lender to the next.

Refinancers may want to move quickly

Young family couple sitting on sofa discussing first mortgage with agent, focus on loan agreement and keys,
fizkes / Shutterstock

Kan points out that refi activity has been volatile over the past few months, likely sensitive to weekly moves in interest rates.

Some homeowners have held back on taking out fresh loans, despite the super-low refinance rates. Mortgage data firm Black Knight calculated that 19.3 million mortgage holders were in a good position to refinance at a much lower rate and save $299 a month, on average.

Be sure to request a rate lock when you submit your application, because a new refinance fee that formally takes effect Dec. 1 could cause mortgage rates to spike. Some lenders already have raised their rates to pass the surcharge along to consumers.

Freddie Mac and Fannie Mae — government-sponsored mortgage giants that buy most U.S. home loans from lenders — say COVID-19 has made the fee necessary, as the companies look to offset losses related to the pandemic.

If rates do rise, try to offset that cost by looking for savings elsewhere. You could do some additional comparison shopping to make sure you’re paying the lowest rate possible on your homeowners insurance.

About the Author

Ethan Rotberg

Ethan Rotberg

Reporter

Ethan Rotberg is a staff reporter at MoneyWise. His background includes nearly 15 years as a writer, editor, designer and communications professional. He loves storytelling, from feature writing to narrative podcasts. His work has appeared in the Toronto Star, CPA Canada and Metro, among others.

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