Mortgage applications droop, led by refis

Model of house shot on graph depicting mortgage rates
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Overall mortgage applications were down 2.5% last week, the Mortgage Bankers Association reported on Wednesday.

Some potential borrowers are being spooked by rising mortgage rates. The MBA’s weekly survey shows the average rate for a 30-year fixed-rate mortgage increased to 3.36% last week, up from 3.28% the previous week.

The decline in mortgage demand was led by a dip in refinance applications, which dropped 5% to their slowest pace since September 2020.

Meanwhile, applications for the "purchase" loans sought by homebuyers were up 3%, a sign that the appetite for homeownership has not abated.

“Purchase applications were strong over the week, driven by both households seeking more living space and younger households looking to enter homeownership,” says Joel Kan, the mortgage bankers' forecaster, in a news release.

Homebuyers go shopping, homeowners miss out

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Requests for purchase loans, or "new mortgages," rose for the fourth straight week. A year into the pandemic, more Americans are working from home and feeling cramped in apartments or houses that lack space to spread out.

Purchase applications were up 26% over last year’s pace.

But refinancing isn't following suit. And, experts say millions of homeowners are missing an opportunity to lower their monthly mortgage payments.

"Some people just don’t get the message," says Tendayi Kapfidze, Lending Tree’s chief economist, in an interview. "It’s definitely not too late to refinance."

Refinance applications last week were down 13% compared to the same week a year ago, the MBA says. Refis made up 60.9% of all mortgage applications, down from 62.9% the previous week.

Though rising, mortgage rates are still historically low

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Mortgage rates have been moving higher in tandem with the yields (interest rates) on Treasury bonds, as the outlook for the U.S. economy improves amid vaccinations and an easing of pandemic-related restrictions, Kan says.

Still, rates today remain more favorable than they were 20, 10 and even two years ago, when the average for a 30-year fixed-rate mortgage topped 4%, according to data from mortgage giant Fredie Mac.

Analysts say don't wait to take out a mortgage or refinance because you're hoping rates will go back down. They might just as easily rise — and do it rapidly.

Peter Warden, editor of The Mortgage Reports, has been encouraging borrowers to lock in a low rate soon, because of the risk of even higher rates.

Deals abound if you shop around

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Though average mortgage rates have been digging in above 3%, some lenders are still offering rates under 3% — but you have to shop around for them.

If you’re looking to refinance or are wanting to buy your first or second home, you’ll want to check multiple lenders to get the best deal on a mortgage rate. Having a strong credit score will help; you can easily get a peek at your credit score for free if you're not sure what it is.

Mortgage rates can vary widely, so it's important to review mortgage offers from at least five lenders. Studies from Freddie Mac study and LendingTree have found that borrowers who get rate quotes from five lenders can save thousands over time.

It pays to shop around when buying or renewing homeowners insurance, too. Check multiple insurers to find the lowest price you can get for the coverage you need.

About the Author

Nancy Sarnoff

Nancy Sarnoff

Senior Reporter/Editor

Nancy Sarnoff is a senior reporter and editor at MoneyWise. Previously, she covered commercial and residential real estate for the Houston Chronicle where she also hosted Looped In, a podcast about the region’s growth, development and economy. Her work has been recognized by the National Association of Real Estate Editors and the Society of American Business Editors and Writers.

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