Mortgage applications rise, led by refinances

man giving paper application facing camera
fizkes / Shutterstock

Mortgage applications increased a whopping 16.7% in the week ending Jan. 8, the Mortgage Bankers Association (MBA) reported Wednesday.

Demand for refinances rose 20% from a week earlier, and those loans accounted for 74.8% of total applications, up from 73.5% the previous week.

In the MBA’s weekly survey of lenders, the average for a 30-year fixed-rate mortgage crawled up to 2.88% last week, from 2.86%. Experts noticed rates rising after U.S. Senate runoff elections in Georgia gave Joe Biden a Democratic-controlled Congress, potentially paving the way for more government spending.

“The expectation of additional fiscal stimulus from the incoming administration, and the rollout of vaccines improving the outlook, drove Treasury yields and [mortgage] rates higher,” says Joel Kan, the MBA’s forecaster.

But, going against the trend, 15-year fixed-rate mortgages — popular for refinance loans — dropped to a record-low average of 2.39% in the industry group’s survey.

Applications for new, homebuyer mortgages — called “purchase loans” — jumped 8% last week, the MBA says, and were up 10% from the same week a year ago.

Homeowners do the refinance dance

Cheerful active romantic couple wearing pajamas dancing in bedroom together,
fizkes / Shutterstock

"Even with the rise in mortgage rates, refinancing did not slow to begin the year, with the index hitting its highest level since last March," adds Kan.

Refi applications have increased 93% versus this time last year, but many good refi candidates are still procrastinating.

More than 19 million mortgage holders could save an average $308 per month by refinancing now, according to the mortgage technology and data provider Black Knight. Experts say it’s worth it if you can get a new rate that's at least 1 percentage point below your current rate.

You might lower your mortgage bills even if your loan is just a year old — especially if you have a solid credit score and at least 20% equity in your home.

If you want to find a spectacularly cheap mortgage before rates go any higher, you must shop around. Rates can vary from one lender to the next, but multiple studies have shown that when you compare a minimum of five rate quotes, you can save thousands of dollars over the life of your loan.

Use those same comparison shopping skills when you sign up for or renew your homeowners insurance. Get quotes from several insurers to find the lowest possible price on the coverage you need.

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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