Demand for refinances surges amid low rates
For the week ending Sept. 17, mortgage applications rose 4.9%, led by a 7% increase in refinance loans, the Mortgage Bankers Association reported on Wednesday.
It was the largest increase in refi demand since July. Joel Kan, the MBA’s associate vice president of forecasting, attributes the surge to homeowners taking advantage of low mortgage rates, which have been both attractive and relatively static for several weeks.
"Homeowners acted while rates remained low at 3.03%," Kan says in a statement, referring to the average rate on a 30-year fixed mortgage in the MBA's weekly survey.
Many borrowers are landing better rates than 3.03%. The long-running rates survey from mortgage giant Freddie Mac last week put the average for a 30-year mortgage at only 2.86%, and multiple lenders are currently offering even lower refinance rates.
Why now is the time to strike
Looking at a pair of recent statistics should help clarify why now, and not later, is the time to move forward with refinancing your mortgage.
After the government released a glowing July jobs report during the first week of August, the average rate on a 30-year fixed mortgage spiked, according to Freddie Mac. But in the weeks since the relatively horrid jobs report for August was released in early September, rates have been fairly steady — and cheap.
The lesson? At this point in the pandemic, positive economic news is likely to raise mortgage rates more than negative news will drag them down. Sure, hospitals in some states are filling up with COVID patients at levels not seen since January, but businesses are open, travel restrictions are loosening and consumer confidence has strengthened.
So long as the economy is allowed to function normally, it can grow and improve; each significant improvement has the potential to lessen the downward pressure the pandemic has been exerting on mortgage rates. Expect more of those positive developments, and higher mortgage rates, going forward.
How to get a low mortgage rate from your lender
It's hard to be approved for any home loan, let alone be offered a low rate, if you’ve accumulated a mountain of expensive debt. If payments to multiple creditors are frustrating your homebuying plans, consider doing some debt cleanup.
By rolling all of your credit card balances and other nagging, high-interest debts into a single, lower-interest debt consolidation loan, you’ll pay far less in interest charges and wipe out your debt faster. That could free up the kind of cash flow lenders look for.
It’s also important to take a quick, free look at your credit score. Borrowers with the highest credit scores are typically offered the lowest rates. A review of your score will tell you if you need to work on it, so you won't apply to a lender and be handed a higher rate.
Once you decide to refinance your home, you’ll want to check mortgage offers from at least five lenders to see who's offering rates that fit your budget. Comparison shopping is a proven way to save big on a new mortgage.
If a refi isn’t something you’re comfortable with, you can always find other ways to decrease the cost of homeownership. When the time comes to buy or renew homeowners insurance, shop around and get quotes from multiple insurers — because you might save hundreds of dollars.