Mortgage activity ticks up as rates ease

Mortgage rates and house on balance

Mortgage applications increased 1.6% in the week ending Aug. 20, the Mortgage Bankers Association reported this week.

Refinance activity rose 1%, after falling 5% during the MBA’s previous survey period. Last week's refinance applications were up 3% from a year ago.

Requests for the "purchase loans" sought by homebuyers grew 3% last week, to the highest level since early July. Still, those applications were down 16% from this time last year.

Joel Kan, the MBA's associate vice president of economic and industry forecasting, attributes the increase in mortgage demand to declining Treasury bond interest rates, which tend to result in lower mortgage rates.

"Treasury yields fell last week, as investors continue to anxiously monitor if the rise in COVID-19 cases in several states starts to dampen economic activity," Kan says in a news release. "Mortgage rates slightly declined as a result, with the 30-year fixed rate decreasing for the first time in three weeks."

In the MBA's weekly survey, 30-year fixed mortgage rates dipped last week from 3.06% to 3.03%, on average. Meanwhile, mortgage giant Freddie Mac said on Thursday that its long-running survey has found the typical 30-year home loan this week is at an even cheaper 2.87%.

Why refinancing shouldn't wait

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It’s a confusing time if you're a homeowner who's been putting off a refi. If you pull the trigger, will you miss out on even lower rates?

Probably not. Unlike what happened during earlier stages in the pandemic, when high infection rates shut down local economies and exerted downward pressure on Treasury yields (and mortgage rates), that same level of economic disruption isn't being seen now.

Despite new infections averaging more than 142,000 over the past week — the highest seven-day average since late January — no state has announced new plans to close businesses.

America’s recovery from COVID, from an economic standpoint at least, may be too far along to set off another significant drop in rates. The government's jobs reports for June and July were both overwhelmingly positive.

As more encouraging economic data trickles out, the upward pressure on rates should only intensify. Freddie Mac is forecasting that 30-year mortgage rates will hit an average 3.4% by the end of this year, and be close to 4% late in 2022. So, you may not want to wait much longer to refinance.

“The combination of sharp increases in home prices and mortgage rates holding near 3% continues to support refinance demand, even for home purchases within the last two years,” says Sara Rutledge, economist for the real estate investment platform Millionacres.

"With mortgage rates unlikely to move materially higher in the short term, there are strong incentives for homeowners to consider refinancing this year," Rutledge says.

How to score a low refi rate

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Though mortgage rates are above January's all-time lows, today's rates might be as attractive as they’re going to get. It's worth exploring how much money you could save with a refi.

A recent Zillow survey found that nearly half the homeowners who refinanced over the last year of ultra-low rates are now saving $300 a month or more.

Bagging the lowest possible rate for your refinance isn’t just a matter of filling out an application. There are a few things you can do to encourage a lender to offer you a better deal.

You'll want to be seen as a low credit risk — which won’t be easy if you’re carrying a pile of high-interest debt, like credit card balances. Taking out a debt consolidation loan can help reduce the amount of interest you're paying, erase your debt faster and improve your cash flow.

Once you're ready to move forward with a refi, don't hop on board with the first lender who claims to offer "the lowest rates around." Instead, check mortgage offers from at least five lenders to find the best rate available for your area and for a borrower with your credit profile.

If a refi isn't possible, you have other ways of cutting the cost of homeownership. When the time comes to buy or renew your homeowners insurance, a little comparison shopping could save you hundreds of dollars.

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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