Refinance activity slides again

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Overall mortgage applications dipped 2.8% in the week ending Nov. 12, led by a 5% drop in refinance activity, the Mortgage Bankers Association reported on Wednesday. Refi demand plummeted 31% compared to the same time last year.

Homeowners have grown cool to refinancing as mortgage rates have moved higher in recent weeks.

"All mortgage rates in MBA's survey increased, with the 30-year fixed rate climbing to 3.20%" from 3.16% a week earlier, says Joel Kan, the mortgage bankers' forecasting chief.

Though rates have been climbing since early August, when 30-year mortgages were averaging 2.97% in the MBA's survey, home loans remain much cheaper than they were before the pandemic broke. At Christmas 2019, the average was a stiff 3.99%.

Could homeowners be putting off a refinance because they think another wave of COVID infections could again squash mortgage rates to record lows? That's a risky bet — and they're bound to be disappointed.

Record-low mortgage rates aren't likely to return

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New coronavirus outbreaks are being reported in Minnesota, Michigan and several other states, while medical experts worry that holiday gatherings and a new "delta plus" variant could drive a winter surge.

But thanks to vaccines and booster shots, no one is expecting U.S. case numbers to soar the way they did in January — when mortgage rates hit rock bottom. A similar boon for homeowners isn’t likely to materialize.

"In order for mortgage rates to fall to the levels seen in early 2021, there will need to be a lot of talk about the 'R' word: recession," says Corey Burr, senior vice president at TTR Sotheby's International Realty in Washington, D.C.

Instead, the spotlight has been on the "I" word: inflation. Prices shot up in October at the fastest pace in more than 30 years, and the Federal Reserve is under pressure to raise interest rates and pull back on its other policies that have kept mortgage rates super-low during the pandemic.

How to secure the lowest refinance rate

Concentrated attentive millennial couple sitting at home office in living room shopping for mortgage rates and ready to apply for a refinance loan.
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If you've put off refinancing your mortgage, you're probably leaving money on the table. Even a refi that results in monthly savings of "only" $100 would put $6,000 back in your pocket over five years.

That’s money you could use to pay off nagging, high-interest debt, fund your kids’ education or invest in the stock market.

Just keep in mind that a lender may not automatically offer you the lowest interest rate available. That usually requires a little bit of effort on your part.

A good first step is to check your credit score, which you can easily do for free. The lowest mortgage rates tend to be given to borrowers with the highest scores.

When you're ready to move forward with a refinance, check mortgage rates from at least five lenders to find the best loan available in your area and for a borrower with your credit profile.

If a refi isn't possible or something you want to do, there are other ways to cut the cost of homeownership. Once it's time to renew your homeowners insurance, always get quotes from multiple insurers to make sure you're not overpaying.

About the Author

Clayton Jarvis

Clayton Jarvis


Clayton Jarvis is a mortgage reporter at MoneyWise. Prior to joining the MoneyWise team, Clay wrote for and edited a variety of real estate publications, including Canadian Real Estate Wealth, Real Estate Professional, Mortgage Broker News, Canadian Mortgage Professional, and Mortgage Professional America.

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