Demand jumps for homebuyer loans

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Applications for all types of mortgages slipped 1.3% during the week ending March 5, the Mortgage Bankers Association, or MBA, reported on Wednesday.

But it was a standout week for the "purchase" mortgages used by homebuyers, as demand for those loans rose by a healthy 7%.

"With the spring buying season at the doorstep, the purchase market had its strongest showing in four week," says Joel Kan, the MBA's researcher. "Overall activity was 2.4% higher than a year ago, and loan sizes moderated for the second straight week — potentially a sign that more first-time buyers are entering the market."

Applications for purchase loans were up 2% compared to last year at the same time.

Homebuyers seem to be shrugging off the surge in mortgage rates. The MBA's weekly survey shows rates on 30-year fixed-rate mortgages rose to an average 3.26%, the highest since last July and up 40 basis points since the start of 2021. A basis point is one-hundredth of 1 percentage point.

Refinance activity dips

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Meanwhile, higher mortgage rates have put refinances in the slow lane. "Activity declined last week for the fourth time in five weeks," Kan says.

Applications for refi loans sank 5% last week and were down a hefty 43% compared to the same week in 2020. Also, refinances accounted for just 64.5% of all mortgage demand last week, down from 67.5% a week earlier, according to the MBA.

Mortgage rates have been rising as the interest surges on Treasury bonds, amid growing optimism among investors about the U.S. economy's recovery.

"Signs of faster economic growth, an improving job market and increased vaccine distribution are pushing (mortgage) rates higher," Kan explains.

Rates are looking even steeper in the lender survey from Mortgage News Daily, which put the average for 30-year fixed-rate mortgages at 3.29% on Wednesday.

“The easiest way to make sense of it all is to say, ‘Rates were ultra low when COVID was at its worst and they've been rising as COVID-related risks have been receding,'" writes MND's chief operating officer Matthew Graham. "To be sure, there are many other contributing factors, but most of them can be linked right back to the COVID narrative."

Is it too late to refinance?

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Not. Even. Close.

Sure, rates have been climbing quickly, but let’s keep things in perspective. Ten years ago, the benchmark 30-year mortgage rate was averaging around 5%. Two decades ago, it was more than 7%. That's more than double today's average mortgage rate.

Refinancing is still a money-saving proposition for many homeowners. Black Knight, one of the mortgage industry’s leading data and tech providers, said this month that millions of Americans can still save hundreds of dollars a month by refinancing their mortgages, even at today’s elevated rates.

If you have a respectable credit score and have built up at least 20% equity in your home, you are likely to be viewed as a solid candidate for a refinance.

Whether you're a refinancing homeowner or a buyer-to-be, you’ll want to find the lowest rate out there — especially with rates as active as they are. It's crucial to shop around and compare at least five mortgage offers, because rates can differ greatly from one lender to the next.

If refinancing isn’t an option but you’re still looking for ways to cut your overall homeownership costs, now is a fine time to reevaluate what you’re paying for home insurance. If the time to buy or renew your coverage is drawing near, check out prices from several insurance companies to find the best deal.

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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