Mortgage applications jump again

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Mortgage applications grew 3.8% for the week ending Oct. 30, driven by increasing demand for refinances, which climbed another 6%, the Mortgage Bankers Association (MBA) reported Wednesday. Refi loans accounted for 68.7% of total mortgage applications, up from 66.7% the previous week.

Mortgage rates have hit record lows numerous times since the pandemic began in March, contributing to an extraordinary 88% jump in refinances compared to a year ago, the MBA says.

The trade group’s survey shows the average rate on a 30-year fixed-rate home loan is essentially unchanged at 3.01%, while rates for 15-year fixed-rate mortgages, FHA loans and jumbo loans all fell to new lows.

As home prices spiral higher, more houses are being pushed into jumbo loan territory. But buyers are finding the best deals yet on those plus-size loans, with rates averaging 3.18% in the MBA’s survey, down from 3.28% the previous week.

Low rates are a boon to buyers in competitive market

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Applications for new mortgages (or “purchase loans”) decreased slightly by 1% from the previous week, but were up 25% from a year ago, according to the mortgage bankers.

New purchase applications have remained flat over the last six weeks, but activity has increased year-over-year for six straight months, demonstrating just how strong 2020 continues to be for the housing market.

“Lower rates are helping buyers tackle double-digit home price gains,” says Danielle Hale, chief economist at Realtor.com. Even with dwindling supplies of homes sparking high competition and rising prices, buyers are still seeing a benefit from reduced borrowing rates.

New builds could help reduce the strain on the market. Construction spending increased in September, the U.S. Census Bureau reported this week.

Homebuyers hunting in a competitive market should compare at least five rate quotes from lenders, because rates can vary widely from one lender to the next.

The refinance frenzy keeps spinning

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With rates so low, some 18.5 million mortgage holders are in a good position to refi and save around $300 monthly, the mortgage data firm Black Knight said earlier this week. The researchers say 2.5 million could even save $500 or more every month by refinancing.

"The drop in rates spurred an uptick in demand for refinances … with borrowers notably seeking conventional and government loans,” says Joel Kan, the MBA's forecaster.

Good refi candidates — those with solid credit scores and at least 20% equity in their homes — need to hurry to lock in the best rates while they can.

The new 0.5% fee on refinance loans formally starts Dec.1, but experts have noticed that many lenders have already started rolling it into their rates.

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

If rates do rise and you have to settle for one that’s not quite rock bottom, you can try to cancel out that cost by lowering your homeowners insurance premium. A little comparison shopping will help you find the lowest rate possible.

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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