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Amid Low Mortgage Rates, Refinances Surge vs. Year Ago

Doug Whiteman
Amid Low Mortgage Rates, Refinances Surge vs. Year Ago

More people are applying for mortgages, particularly for refinance loans. Last week, those were up a staggering 314% compared to a year ago, a trade group reported Wednesday.

One reason lenders were dealing with more than four times as many refi applications as they were last year at the same time is that the year-ago week included Thanksgiving, which fell earlier in 2018, the Mortgage Bankers Association says.

But borrowers also are seizing on low mortgage rates, says the group's vice president of forecasting, Joel Kan.

"With roughly five weeks of reporting data left in 2019, the mortgage market is on track for its best year for originations since 2007," Kan says.

Rates have ticked up slightly this week, but they're still so much lower than they were in 2018 that homeowners are still finding they can save money by refinancing mortgages that are relatively new.

Mortgage applications rise

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Mortgage applications overall were up 1.5% last week, the Mortgage Bankers Association reports.

Applications for refinance loans jumped 4% compared to a week earlier. Refinancings accounted for 62% of all mortgage applications last week, up from 59.5% the previous week.

The amount of mortgage purchase applications — for loans to buy homes — slipped 1% last week but were 55% higher than a year ago.

Use this calculator to see how a refinance could cut your monthly mortgage payment.

Mortgage rates edge higher

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Mortgage rates continue to flutter around and are a little higher this week, after falling last week.

"Following a decline in the first nine months of 2019, mortgage rates have traded narrower during the last two months with a modest drift upward due to an improved economic outlook,” says Sam Khater, chief economist for the giant mortgage company Freddie Mac.

Rates on 30-year fixed-rate mortgages have ticked up to an average 3.68%, from 3.66% last week, Freddie Mac reported Wednesday. The loans in the Freddie Mac survey come with an average 0.5 point.

The average for 15-year mortgages is holding steady at 3.15%, unchanged from last week. Those shorter-term home loans are a popular choice for refis.

Last year at this time, 15-year fixed-rate mortgages were averaging 4.25%.

Rates are higher this week on 5/1 adjustable-rate mortgages, or ARMs, which are level for five years and then can adjust up — or down — every year after that.

ARMs are currently being offered at an average initial rate of 3.43%, versus 3.39% last week. A year ago, those ARM starter rates were averaging 4.12%.

Check out today's best mortgage rates where you live.

The outlook for mortgages

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The Mortgage Bankers Association's Kan says the refinance market is ready to cool off.

"Refinances have been strong this month, but we are starting to see the average pace slow compared to the peak experienced in August through October," he says.

But low mortgage rates should continue to keep borrowers engaged. The benchmark 30-year mortgage rate is likely to remain down around an average 3.7% through the end of the year, according to Freddie Mac's latest forecast.

Just slightly higher rates — averaging 3.8% — are predicted for 2020.

Though rates have been trending higher, they're still down considerably from last year. Freddie Mac has said that homeowners who've refinanced in 2019 are saving about $1,700 a year in interest costs.