Refinances lead a jump in mortgage applications

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Overall mortgage applications rose 6.8% in the week ending Aug. 31, led by a 9% jump in demand for refinance loans, the Mortgage Bankers Association reported on Wednesday.

Refi applications poured in at the strongest pace since April, says Joel Kan, the trade group's lead forecaster. And, they were up 47% compared to the same week in 2019.

Homeowners weren't the only ones borrowing. Applications for the "purchase mortgages" used by homebuyers increased 2%, the mortgage bankers say.

Ultra-low mortgage rates were the lure, particularly for refinancers. Rates for 30-year fixed-rate mortgages plunged during the week to a record 2.88% in the nearly 50-year-old survey from mortgage giant Freddie Mac.

"Mortgage rates fell across the board last week, as investors grew less optimistic of the economic rebound given the resurgence of (COVID-19) virus cases," Kan explains. "Refi activity responded to these lower rates."

Refinances accounted for nearly two-thirds of last week's total mortgage applications — the highest level since May.

Jaw-dropping mortgage rates have given homeowners a huge incentive to refinance and save. Around 18 million homeowners could reduce their rates by at least three-quarters of one percentage point (say, from 3.75% to 3% or lower) and cut their mortgage payments by an average $287, data firm Black Knight has said.

But time may be running out.

Use the mortgage calculator below to see how low your monthly payment would be with one of today's super-low mortgage rates:

Time to grab a low mortgage rate — while you can

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Anyone who's been wrestling with whether to refinance an existing mortgage or buy a home might want to join the borrowing blitz — before it's too late.

In a survey done by mortgage company Fannie Mae, 35% of consumers say they think mortgage rates will rise over the next 12 months, up from 32% who said that last month.

And those Americans may have good intuition. Thirty-year mortgage rates have taken off this week in the regular survey of lenders done by Mortgage News Daily, from an average 2.82% on Monday to 2.88% a day later.

"Some prospective borrowers will now be looking at an eighth of a point (0.125%) increase," writes Matthew Graham, MND's chief operating officer. "That comes out to roughly $20 a month on a $300,000 mortgage. Others will experience the shift in the form of higher upfront costs (or a lower lender credit)."

On Wednesday, 30-year rates spiked further in the survey: to an average 2.92%. Mortgage rates have gone up this week as higher-than-expected inflation data has pushed up the interest, or "yields," on Treasury bonds; rates tend to track the yield of the Treasury's 10-year note.

Will mortgage rates keep rising? The people who track them "don't have crystal balls," Graham says. But just in case the days are numbered for rates south of 3%, homeowners and homebuyers may not want to waste time.

If you're in the market for a loan, seek out mortgage offers from multiple lenders — and if the first rate quote you look at is on the high side, don't be discouraged because rates can vary widely from one lender to the next. Keep shopping around until you find something that looks good.

This approach also works well when the time comes to renew or buy your homeowners insurance. Get quotes from several insurance companies so you'll find the right coverage at the best price.

Take a look at today's top mortgage rates where you are:

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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