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Falling Mortgage Rates Set Off a Stampede of Borrowing

Doug Whiteman
Falling Mortgage Rates Set Off a Stampede of Borrowing

Mortgage applications have surged more than 30% as Americans flock to take advantage of the lowest mortgage rates in months, a trade group said Wednesday.

"The mortgage market saw a strong start to 2020. Applications increased across the board" last week, says Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association. "Lower rates provided a larger incentive for borrowers to act."

If you're thinking about buying a home, or if you already have a mortgage but could do better by refinancing, you ought to think about joining the crowd.

Demand for mortgages skyrockets

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Low mortgage rates have kicked off fireworks in home lending.

Overall mortgage applications soared 30.2% in the week ending Jan. 10, the Mortgage Bankers Association says.

Leading the way was a major spike in refinances. Homeowners applied for 43% more of those than they did the previous week, and last week's refi applications were up 109% from a year earlier — meaning lenders got more than double the number they received during the first full week of January 2019.

Mortgage "purchase applications" — for loans to buy homes — jumped 16% last week to a level not seen since 2009. Still, refinances accounted for 62.9% of all mortgage activity last week.

"It remains to be seen if this strong refinancing pace is sustainable," Kan says, "but even with the robust activity the last two weeks, the level is still below what occurred last fall."

Translation: Some homeowners who could be refinancing right now are missing out on low rates.

Is that you? Take a look at today's best mortgage rates where you live.

Applications rise as mortgage rates drop

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Mortgage rates are down at levels not seen in months.

Borrowers rushed to sign up for home loans after mortgage rates fell to their lowest levels in three months, according to the weekly survey from mortgage giant Freddie Mac.

Interest rates were weighed down last week by the U.S. tensions with Iran. As investors sought safety in U.S. Treasury bonds, bond prices went up — and their yields, or interest rates, fell. Mortgage rates tend to follow the track of the 10-year Treasury note.

Rates plummeted, with 30-year fixed-rate mortgages averaging 3.64% — down from 3.72% a week earlier. On 15-year fixed-rate home loans — a popular option for refinances — rates dropped to an average 3.07%, from 3.16%.

Homeowners might find they'll save money by refinancing, even if their current mortgage is from 2018.

Use this calculator to see the kind of monthly payment you can expect from today's low rates.

The outlook for mortgages

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Low rates are helping to bring out the buyers.

Freddie Mac will report fresh mortgage data on Thursday. Treasury yields have been falling this week, which suggests mortgage rates will keep tumbling lower.

Kan says that will help fuel something real estate agents have already been reporting: a super-early start to the spring homebuying season. It's a major reason for the big pop in mortgage purchase applications.

"Low rates and the solid job market continue to encourage prospective buyers to enter the market," he says.

The government reported last Friday that the U.S. unemployment rate remained at a 50-year low of just 3.5% in December as employers added 145,000 new jobs.

Freddie Mac is forecasting that 30-year mortgage rates will remain low throughout 2020, averaging just 3.8% this year.

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