Homeowners, take note: Millions of you are overlooking hundreds of dollars you could be saving by refinancing your mortgages.
Mortgage applications to refinance home loans have fallen for a second straight week, according to the latest report from a mortgage industry trade group. Demand for homebuyer loans also is down, even though mortgage rates are still historically low.
Borrowers still have time to grab a cheap loan, though maybe not too much time. Thirty-year mortgage rates remain under 3%, on average — but with the economy coming back from the pandemic, rates are likely to start rising again soon.
Homeowners and buyers step back
Mortgage applications fell 4% last week, to the lowest level since February 2020, the Mortgage Bankers Association reported on Wednesday. The decline was driven by drops in both refinance and purchase loan requests during the week ending May 28.
Refi applications fell 5% from the previous week, but were 6% higher than the same week a year earlier. Refinances made up a slightly smaller share of overall mortgage activity last week: 61.3% vs. 61.4% the week before.
Applications for the "purchase loans" used by buyers also slid, going down 3% last week and 2% from a year earlier. The MBA says purchase applications have fallen for five straight weeks on a year-over-year basis.
“Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continue to hold back purchase activity,” explains Joel Kan, the MBA’s chief forecaster.
Is this a sign the pandemic buying boom is ending? It could be, but housing supply has been falling short of demand. The coming weeks will be a good indicator of how the market will shake out this summer.
"We’ll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes," Lawrence Yun, chief economist of the National Association of Realtors, said recently.
Don't assume mortgage rates will stay low
Mortgage rates recently dipped back under 3% in the popular and long-running survey from mortgage giant Freddie Mac.
It puts this week's average interest rate on the popular 30-year fixed-rate mortgage at just 2.99%. While that's up from January’s all-time low, it’s still among the lowest in history, according to Freddie Mac’s data. Last year at this time, the 30-year fixed-rate mortgage averaged 3.15%.
The low rates have been a side effect of the COVID economic crisis. Rates tend to fall when the economy is sluggish, and rise as it improves.
Mortgage experts have forecast that rates will end 2021 in the mid-to-high 3% range.
But with rates at their current levels, 14.1 homeowners can save an average $287 a month by refinancing, the mortgage data and technology provider Black Knight says.
How to find a low rate — while you can
If you’re ready to buy or want to look into your options to refinance, shop around to find the lowest mortgage rate available in your area for someone with your credit score. Haven’t seen your score in a while? It’s easy today to get a free look at your credit score.
Studies have shown comparison shopping will net you the most savings. So if you're considering a mortgage refinance, be sure to check rates from at least five lenders.
If a refi isn’t possible for you right now, there are other ways to slash the costs of homeownership. When the time comes to buy or renew your homeowners insurance policy, get quotes from multiple insurers to make sure you’re not paying more than you should.
And remember that when you apply for a mortgage, lenders will want to see signs that you’ll be able to pay back your loan. It’s not going to look great if you’re carrying multiple high-interest debts. If that’s your situation, consider rolling those debts into a single, lower-interest debt consolidation loan.
You’ll cut the cost of your debt and potentially pay it off sooner.