Mortgage lending slows even as low rates yield big refinancing savings

Mortgage lending slows even as low rates yield big refinancing savings

Mortgage lending slows even as low rates yield big refinancing savings

Mortgage applications have fallen for the third straight week, driven by a decline in refinancing activity, according to the latest weekly report from a mortgage industry trading group.

That despite the mortgage interest rate at . stays near-record lows, allowing millions of homeowners to refinance their homes into cheaper loans.

Borrowers can save hundreds of dollars a month on their mortgage payments, recent data shows, but the time to do so is slipping away. Experts think mortgage rates are likely to rise again once the economy recovers from the pandemic.

Buyers hold on as homeowners pull out

House model with keys and ballpoint pen on contract paper

Andrey_Popov / Shutterstock

Mortgage applications fell 3.1% for the week ending June 4, the Mortgage Bankers Association reported on Wednesday.

A 5% drop in refi activity led to the decline, and refinancing loans also accounted for a smaller share of total mortgage activity – from 61.3% to 60.4%, the lowest level since April.

“So many homeowners have refinanced in the past year that a surge in mortgage refinancing will only come if rates retest their lows from last year,” said Corey Burr, senior vice president at TTR Sotheby’s International Realty in Washington, DC. to MoneyWise. “Otherwise, if interest rates remain the same, refinancing demand will be lukewarm.”

Applications for mortgages for the purchase of homes rose by a slight 0.3% compared to a week earlier, but fell by 24% compared to the same week last year.

The big annual drop, says Mortgage bankers’ chief forecaster, Joel Kan, was the result of Memorial Day 2021 being compared to a non-holiday week last year and of a big jump in applications in May last year, when the first lockdowns from the pandemic began to lift.

Strengthening economy = higher mortgage interest

Up and down arrows and house on seesaw on wooden desk

Andrey_Popov / Shutterstock

Demand for mortgages is falling, although mortgage interest rates are still low. According to mortgage giant Freddie Mac’s long-term survey, the average interest rate on America’s most popular home loan – the 30-year fixed-rate mortgage – remains below 3%. At 2.99%, the average percentage is among the lowest in history.

With rates at current levels, some 14.1 homeowners save an average of $287 per month through refinancing, mortgage data and technology provider Black Knight said recently.

Even as home prices continue to rise and inventories remain limited, consumers remain hopeful that interest rates will remain low, says a recent survey of homebuyer sentiment from mortgage company Fannie Mae.

“Despite the challenging buying conditions, consumers appear to be more likely to buy on their next move, a preference that may be supported by expectations of continued low mortgage rates, as well as the high savings rate during the pandemic,” said Doug Duncan, Fannie Mae’s chief economist.

Additional savings, he says, “may have enabled many to pay a down payment.”

Borrowers may hope low interest rates persist, but the Mortgage Bankers Association has projected that 30-year yields will rise to an average of 3.5% by the end of 2021, and other experts say mortgage rates will be near the peak this year. 4% can come. . Borrowing costs are expected to rise as the economy picks up.

Find a lower rate – while you still can

Full length happy family sitting on the couch between cardboard

fizkes / Shutterstock

When you’re ready to buy or research your refinancing options, make sure your credit score is solid enough to get the best mortgage rate. If you haven’t seen your score in a while, it’s easy to get a free look at your credit score.

Once you’re ready to find a lender, keep in mind that several studies have shown that comparison shopping gives you the most savings. So definitely do it view rates from at least five lenders.

And remember that when you apply for a mortgage, lenders want to see signals that you can repay your loan. It doesn’t look great if you have credit card balances and other high-interest debt with you. If that’s your situation, consider rolling up those debts into a single, consolidation loan for debt with lower interest rates.

You lower the cost of your debt and may pay earlier.

And if you own a home but can’t refinance, there are other ways to save. When it’s time to renew your home insurance policy, request quotes from multiple insurers to make sure you don’t pay more than you should.

This div height required for enabling the sticky sidebar