Low rates put mortgages in higher demand

pen and key on mortgage application form
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Mortgage applications rose 2.8% last week compared to the week before, the Mortgage Bankers Association reported on Wednesday.

The number of refinance applications jumped 3% last week, reaching a six-month high. That happened as 30-year fixed mortgage rates remained under 3% in the MBA's weekly survey for a second week, at an average 2.99%.

"Homeowners continue to respond to lower rates, with refinance activity climbing to the highest level since February 2021," says MBA forecaster Joel Kan.

The low rates also appear to have had an impact on demand for purchase mortgages, which increased by 2% after weeks of steady declines. That increase was driven by applications for low-down-payment mortgages that are insured by the government, including FHA loans.

"With low for-sale inventory keeping home price appreciation in many markets at record highs, the jump in FHA purchase applications is potentially a sign that more first-time buyers are finding purchase options despite the high prices," Kan says.

Despite the increased luck buyers appear to be having, refinances still made up a clear majority (68%) of mortgage activity in the U.S. last week, according to the MBA.

Will rates stay at rock bottom? Don't count on it

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While the current surge in COVID delta infections has injected new uncertainty into the U.S. economy, its economic impact is unlikely to be as dire as what was felt during the first few months of the pandemic last year.

Though cases are skyrocketing in states including Mississippi, Louisiana, Texas and Florida, there has been no indication that any businesses will again be asked to shut down.

If there’s no increase in unemployment or dramatic drop in income to act as a drag on economic activity, there will also be less downward pressure on mortgage rates. Instead, rates are likely to rise whenever evidence of positive economic movement presents itself.

In fact, by one measure mortgage rates climbed steadily after Friday, when the U.S. Bureau of Labor Statistics announced that a better-than-expected 943,000 new jobs were added to the economy in July.

Mortgage News Daily reports 30-year fixed mortgage rates increased from an average 2.85% last Thursday, the day before the jobs news, to 2.99% on Tuesday.

If the U.S. can step up its vaccinations and get delta under control, positive economic news could start turning up more frequently. When it does, expect mortgage rates to move higher.

How to find the lowest of today's low mortgage rates

Happy young attractive woman using calculator and laptop for finding and calculating mortgage rates.
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With rates at their current levels, mortgage data and technology supplier Black Knight has estimated that 15.1 million current homeowners could save an average $298 a month by refinancing their mortgages.

But whether you’re doing a refi or purchasing a home, getting the lowest mortgage rate from a lender generally takes a little work on your part. The potential savings are worth the effort.

The lowest rates generally go to borrowers with the strongest credit, so review your credit score — which you can easily peek at for free. You may benefit from improving your score before reaching out to lenders.

Speaking of credit, mortgage lenders tend to shy away from borrowers who are already carrying multiple high-interest debts, including on credit cards. Consider wiping out those balances with a lower-interest debt consolidation loan, to cut your interest costs and eliminate your debt faster.

Once it's time to shop for a mortgage, compare offers from at least five lenders to find the best rate for your budget.

A little comparison shopping might help you discover a better deal on your homeowners insurance, too.

About the Author

Clayton Jarvis

Clayton Jarvis

Reporter

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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