Overall mortgage demand dips
Mortgage applications slid 5.1% in the week ending Feb. 12, the Mortgage Bankers Association, or MBA, reported on Wednesday.
Demand for refinance loans fell 5% last week, while the MBA's weekly mortgage rates survey showed the average for a 30-year fixed-rate mortgage rose from 2.96% to 2.98% — the highest since November.
"The uptick in rates has slightly dampened refinance activity, with MBA's index falling for the second week in a row, and the overall share dipping below 70% for the first time since last October," says Joel Kan, the trade group's forecaster.
Refi loans accounted for just 69.3% of all mortgage activity last week, down from 70.2% a week earlier. But the refinance market is still looking stronger than a year ago: The MBA says applications for those loans are up 51% versus the same week in 2020.
Applications for new, homebuyer mortgages — called "purchase loans" — sank 5% last week but were 15% higher than than they were last year.
The risk of even higher mortgage rates
"Expectations of faster economic growth and inflation continue to push Treasury yields and mortgage rates higher," Kan explains.
Mortgage rates tend to track the interest, or yield, on the Treasury's 10-year note — and it surged earlier this week to its steepest point since February 2020, before the pandemic sank its claws into the U.S. economy.
Analysts say rising interest rates reflect optimism over the economy as more Americans get their COVID vaccines and as Congress closes in on an economic rescue bill, one that would give most people a new stimulus check for $1,400.
"Recovery prospects, renewed focus on stimulus, inflation concerns, a brighter covid outlook, etc... All of these are reasons for an ongoing, gradual trend toward higher rates in 2021," warns Matthew Graham, chief operating officer of Mortgage News Daily.
MND's daily survey of lenders had 30-year fixed mortgage rates soaring on Tuesday, to an average 2.96% from 2.86% on Friday, before the long holiday weekend.
Borrowers may have no time to lose
But with America's most popular mortgage still available at under 3%, on average, "the world (of low rates) is far from over," Graham says.
It still pays for homeowners to refinance mortgages from late 2019 or earlier, when the rates on home loans were considerably higher.
An estimated 16.7 million homeowners who've been slow to refi can save an average $303 a month by trading in their current loans for brand-new ones with a much lower rates, the mortgage technology and data provider Black Knight reported this month.
You're considered a good refinance candidate if you've got a respectable credit score and at least 20% equity in your home.
To find the best possible rate for your refi, it's essential to shop around — because you can find huge differences in rates from one lender to another. But multiple studies have found you have a good shot at saving thousands of dollars if you gather and compare at least five mortgage rate quotes.
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