Refinances drive spike in mortgage applications
Overall mortgage applications rose 8.1% in the week ending Jan. 29, the Mortgage Bankers Association (MBA) reported Wednesday.
The increase was driven by refinance requests, which jumped 11% and now account for 71.4% of total applications, from 70.7% the previous week. Last week’s refi demand was 59% higher versus the same week a year ago.
The trade group’s survey of lenders shows the average rate for a 30-year fixed-rate mortgage dropped to 2.92% last week, from 2.95% a week earlier.
"The one-week reversal in the recent upswing in rates drove an increase in both conventional and government refinance activity, as borrowers continue to lock in these historically low rates," says Joel Kan, the MBA's forecaster.
Will mortgage rates keep dropping?
While homeowners were eagerly submitting loan applications, prospective homebuyers weren’t quite as enthusiastic.
Applications for new mortgages — called “purchase loans” — were flat last week, inching up just 0.1% as low interest rates continued to drive up competition and prices in a market where homes have been in short supply.
Though mortgage rates eased last week, “they remained above December’s record-low levels,” says George Ratiu, senior economist at Realtor.com. “We expect rates to gradually float higher this year.”
Other forecasters also expect to see mortgage rates rise again. Positive news on the vaccine rollout could nudge them upward if investors grow more confident in the economy getting back on track.
Capitalize on low rates while you can
If you haven’t refinanced yet, time may be running out on rock-bottom rates. More than 19 million homeowners can still save an average $308 per month by refinancing now, according to mortgage technology and data provider Black Knight.
The experts say a good refi candidate needs a solid credit score and at least 20% equity in their home to score a low rate.
You’ll also need to shop around, because rates can differ greatly from one lender to the next. Multiple studies have found that if you compare at least five rate quotes, you can save thousands of dollars over the life of your loan.
If mortgage rates jump again, you’ll still have other ways to cut your housing costs. Do a bit more comparison shopping when you buy or renew your homeowners insurance, and you could find the coverage you need at a much lower price.