Mortgage rates fall, refinances rise – but report says savings window is narrowing

Mortgage rates have come down and fueled a new wave of refinancing.

Applications for refi loans have just jumped, after rates fell for the first time in weeks, according to a new report from the nation’s largest mortgage trade association.

But the group warns that recalcitrant homeowners may not have much time to take advantage of a cheap rate that could save them a lot of money.

Refinancing requests take off

In the week ending Dec. 3, mortgage applications rose 2%, driven by a 9% increase in refinancing demand, the Mortgage Bankers Association reported on Wednesday. In the previous week’s report, refi requests fell 15%.

Interest on refinance loans warmed again as the average for a 30-year fixed-rate mortgage edged down to 3.30% in the MBA’s weekly survey, from 3.31% a week earlier.

“Mortgage rates fell for the first time in a month, prompting a resumption in refinances, with government refinances increasing by more than 20% during the week,” said Joel Kan, chief mortgage bankers forecaster. A sharp drop in rates on FHA refi loans has resulted in a sharp increase in government refinancing.

Meanwhile, demand for sought-after home purchase loans by homebuyers fell 5% last week, according to the MBA.

Refinances reached 63.9% of all mortgage applications, up from 59.4% the week before.

A narrowing “window of opportunity”

Homeowners who rushed to take advantage of lower rates last week have made a smart move because Americans may not be much more likely to achieve significant refinancing savings, Kan said.

“Borrowers continue to seize these opportunities, but if rates tend to rise as projected by MBA, the refinancing window of opportunity will continue to narrow,” he said.

Many owners have been stubbornly slow to refi. A recent Zillow survey found that 78% of eligible homeowners did not jump to ultra-low rates in the first year of the pandemic. Of those who refinanced, almost half saved at least $ 300 per month.

The story continues

Although mortgage rates have risen, they remain historically low – and much lower than they were before COVID-19. In mid-December 2019, mortgage bankers estimated the 30-year average mortgage rate at 3.98%.

The trade group expects rates to hit 4% by the end of 2022 as the economy continues to recover from the virus.

How to get 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 you $ 6,000 back in your pocket over five years.

It’s money you could use to pay off stubborn, high-interest debt, fund your children’s education, or invest in the stock market.

Just keep in mind that a lender may not automatically offer you the lowest interest rate available. It usually takes a 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 refinance, check the mortgage rates of 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 you want to do something about it, there are other ways to lower the costs of home ownership. When it’s time to renew your home insurance, get quotes from multiple insurers to make sure you’re not overpaying.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.