Refinance requests take off
During the week ending Dec. 17, applications for mortgages edged down 0.6%, despite a 2% boost in refinance demand, the Mortgage Bankers Association is reporting. In the previous week's report, refi applications sank 6%.
Interest in refi loans heated up again as mortgage rates fell in the MBA's weekly survey.
"The 30-year fixed rate decreased to 3.27% — its lowest level in four weeks — and helped spur an increase in refinances across all loan types," says Joel Kan, the mortgage bankers' chief forecaster.
"FHA and VA refinances jumped 4% and 12%, respectively," Kan says, referring to the loans with easier terms that are backed by the Federal Housing Administration and the Department of Veterans Affairs.
Meanwhile, demand for the home purchase loans sought by homebuyers dropped 3% last week, the MBA says.
Refinances rose to 65.2% of all mortgage applications, from 63.3% the previous week. Still, last week's refi activity was down a sharp 42% from a year ago.
A shrinking 'window of opportunity'
Homeowners who rushed to take advantage of last week's lower rates made a smart move, because Americans may not get many more chances to score deep refinance savings.
"Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller," Kan said recently. His group expects rates to hit 4% by the end of 2022 as the economy continues its recovery from the virus.
Despite the risk of higher rates, homeowners have been stubbornly slow to refi. A recent Zillow report found 78% of eligible homeowners didn't leap at the ultra-low rates of the pandemic's first year. Among those who did refinance, nearly half saved at least $300 a month.
A separate rates survey, from mortgage giant Freddie Mac, this week has 30-year fixed mortgage rates averaging 3.05%, the lowest since Nov. 10. But the company's chief economist, Sam Khater, warned on Thursday that would-be borrowers shouldn't assume that cheap rates will stick around.
"The market volatility resulting from the COVID-19 omicron variant is causing mortgage rates to decrease," Khater says. "However, rates are expected to increase in 2022 which will impact homebuyer demand as well as refinance activity."
How to secure the lowest refinance rate
If you've put off refinancing your mortgage, you're probably leaving money on the table. Even a refi that results in monthly savings of "only" $100 would put $6,000 back in your pocket over five years.
Just keep in mind that a lender may not automatically offer you the lowest interest rate available. That usually requires a little bit of effort on your part.
A good first step is to check your credit score, which you can easily do for free. The lowest mortgage rates tend to go to borrowers with the highest scores.
When you're ready to move forward with a refinance, check mortgage rates from at least five lenders to find the best loan available in your area and for a borrower with your credit profile.
If a refi isn't possible or something you want to do, there are other ways to cut the cost of homeownership. When it's time to renew your homeowners insurance, get quotes from multiple insurers to make sure you're not overpaying.