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Overall mortgage demand declines

Figurines of houses and down arrow chart negative trend easel. Represents declining mortgage applications.
Andrii Yalanskyi / Shutterstock

Mortgage applications fell 4.1% in the week ending Feb. 5, the Mortgage Bankers Association, or MBA, reported on Wednesday.

Refinance requests declined 4% from a week earlier but were up a solid 46% compared to the same week in 2020. Refinances accounted for 70.2% of all mortgage applications last week.

"Demand for refinances is still very strong this winter," says Joel Kan, the MBA's forecaster.

Applications for new, homebuyer mortgages — called "purchase loans" — dropped 5% last week but were 17% higher versus a year ago.

The trade group suggests rising mortgage rates are dragging down mortgage applications. In the MBA's weekly survey of lenders, the average rate for a 30-year fixed-rate mortgage jumped last week to 2.96%, the highest since November.

But rates look much more attractive in other surveys. Mortgage News Daily on Tuesday pegged 30-year rates at an average 2.83%, down from 2.85% on Monday.

More: Mortgage payoff calculator

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The risk of rising rates

the roof of the house with nice window
M Kunz / Shutterstock

Still, the rates on home loans appear likely to head higher. Mortgage giant Freddie Mac is predicting that 30-year fixed mortgage rates will average close to 3% throughout 2021.

Rates tend to follow the interest on Treasury bonds, and bond yields have been climbing. Earlier this week, the yield on the benchmark 10-year Treasury note was the highest since early 2020, and the 30-year Treasury yield popped above 2% for the first time since the coronavirus crisis began.

"Treasury rates have been driven higher by expectations of faster economic growth as the COVID-19 vaccine rollout continues," Kan explains. Another source of optimism has been the economic aid — including new stimulus checks — that's moving quickly through Congress.

If you own your home and haven't refinanced in a while, you'll want to get going on that soon, in case mortgage rates go up. Close to 17 million mortgage holders still have an opportunity to save an average $303 per month by refinancing now, the mortgage technology and data provider Black Knight reported this month.

You can mow down your monthly payment even if your loan is just a year old — especially if you have a solid credit score and at least 20% equity in your home.

To find the best possible rate for your refi, you'll need to shop around. Rates can vary from one lender to the next, but a Freddie Mac study found that when you compare at least five rate quotes, you'll save an average $3,000.

Use those same comparison shopping skills when you buy or renew your homeowners insurance. Get quotes from several insurance companies to find the lowest possible price on the coverage you need.


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About the Author

Doug Whiteman

Doug Whiteman

Former Editor-in-Chief

Doug Whiteman was formerly the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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