Refi activity shrinks amid a rising economy

Mortgage Refinance Application Form Concept / Shutterstock

For the week ending Sept. 24, overall mortgage activity dipped 1.1% from the previous week, the Mortgage Bankers Association reported on Wednesday. Refi activity was down 1% from the previous week and was essentially flat from a year earlier.

Demand has fallen as economic optimism fuels stronger mortgage rates. The MBA's survey found the average rate on the nation’s most popular loan, the 30-year fixed-rate mortgage, has reached 3.10%, the highest level since early July.

"The increase in rates — mostly later in the week — led to a decrease in both purchase and refinance applications," says Joel Kan, the association’s vice president of economic and industry forecasting.

Other rate watchers also are tracking increases. Mortgage giant Freddie Mac reported the averages on 30- and 15-year mortgages inched up last week to 2.88% and 2.15%, respectively, in its closely watched survey. Mortgage News Daily on Wednesday reported a 30-year average rate of 3.15%.

Even so, mortgage rates remain far lower than they were before the pandemic. And while more than three-quarters of homeowners did not refinance to take advantage of cheap rates during the 12 months that ended in April, nearly half who did are now saving $300 or more each month, according to a Zillow study.

Saying goodbye to low rates?

three wooden houses and a red up arrow on the sign. Real estate value increase. High rates of construction, high liquidity. Supply and demand. Rising prices for housing, building maintenance.
Andrii Yalanskyi / Shutterstock

With the U.S. economy on an upswing, today’s low mortgage rates are likely to rise faster than many had been expecting.

Businesses are open, employers are creating millions of new jobs, and — despite rising COVID-19 infections in many parts of the country — the pandemic no longer seems to be an economic catastrophe.

If you’re waiting to refinance because you’re hoping rates will go back down, you might want to rethink that strategy.

Interest rates have been going up as foreign investors pour money into the U.S. financial markets amid a slowdown in economic growth around the world.

About a week ago, the Federal Reserve released new economic projections indicating it could start hiking interest earlier than expected. The Fed also signaled it may be ready to scale back its purchases of Treasury bonds and mortgage-backed securities, efforts that have helped keep mortgage rates low.

A recent Freddie Mac forecast put the 30-year rate at around 3.4% by year-end, then rising to 3.8% by the end of next year.

How to find a low rate while you can

Serious african american couple using calculator and laptop for calaulating finance. Diverse upset man and woman taxing, accounting with check credit analytic for mortgage payment.
fizkes / Shutterstock

If you are one of the millions of homeowners who qualify for a refinance but haven’t picked up the phone, you could potentially be forgoing hundreds of dollars a month that could go toward paying off high-interest debt like credit card balances, or be used for investing in the stock market.

To make sure you’re getting the lowest rate on a refi, shop around to at least five lenders to find the best loan for your budget.

The cheapest mortgage rates go to those with the best credit profiles. Take a look at your credit score, which you can easily do for free, and see if it needs some work before you start submitting loan applications.

If you’re not able to refinance, there are other ways to cut the cost of homeownership. When your homeowners insurance policy comes up for renewal, be sure to gather quotes from multiple insurers. That, too, could save you hundreds of dollars.

About the Author

Nancy Sarnoff

Nancy Sarnoff

Freelance Contributor

Nancy Sarnoff is a freelance contributor with 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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