Millions of homeowners are missing out on hundreds of dollars in savings by refinancing their mortgages.
According to the most recent report from a mortgage industry trade group, refinance mortgage applications fell for the second week in a row. Demand for homebuyer loans is also declining, despite the fact that mortgage rates remain historically low.
Borrowers still have time to secure a low-interest loan, though perhaps not for long. Thirty-year mortgage rates are still below 3% on average, but with the economy recovering from the pandemic, rates are likely to begin rising again soon. The Mortgage Bankers Association reported on Wednesday that mortgage applications fell 4% last week, to the lowest level since February 2020. The drop was caused by a drop in both refinance and purchase loan applications during the week ending May 28.
Refinance applications fell 5% from the previous week, but were 6% higher than the same week a year ago. Refinances accounted for 61.3 percent of total mortgage activity last week, down from 61.4 percent the week before.
Applications for “purchase loans,” which are used by buyers, fell 3 percent last week and 2 percent year on year. According to the MBA, purchase applications have been declining for five weeks in a row on a year-over-year basis. “Tight housing inventory, barriers to faster new construction, and rapidly rising home prices continue to stymie purchase activity,” says Joel Kan, the MBA’s chief forecaster.
Is this a sign that the pandemic buying frenzy is coming to an end? It could be, but housing supply has consistently lagged behind demand. The next few weeks will provide a good indication of how the market will shake out this summer.
“We’ll see more inventory come to market later this year as more COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes,” said Lawrence Yun, chief economist for the National Association of Realtors. Mortgage rates recently fell back below 3%, according to Freddie Mac’s popular and long-running survey.
The average interest rate on the popular 30-year fixed-rate mortgage this week is just 2.99 percent. While this is an improvement over January’s all-time low, it remains among the lowest in history, according to Freddie Mac data. At this time last year, the 30-year fixed-rate mortgage averaged 3.15 percent.
The low rates are a result of the COVID economic crisis. When the economy is sluggish, interest rates tend to fall, and when it improves, they tend to rise. Mortgage experts predict that rates will end 2021 in the mid-to-high 3% range.
However, at current rates, 14.1 homeowners can save an average of $287 per month by refinancing, according to Black Knight, a mortgage data and technology provider.
If you’re ready to buy or considering refinancing, shop around to find the lowest mortgage rate available in your area for someone with your credit score.
According to studies, comparison shopping will save you the most money. So, if you’re thinking about refinancing your mortgage, make sure to get quotes from at least five lenders. If a refinance is not currently an option for you, there are other ways to reduce the costs of homeownership. When it comes time to purchase or renew your homeowners insurance policy, get quotes from multiple insurers to ensure you are not overpaying.
Also, keep in mind that when you apply for a mortgage, lenders will look for evidence that you will be able to repay your loan. If you have multiple high-interest debts, it will not look good. If this is the case, consider consolidating your debts into a single, lower-interest debt consolidation loan.