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As mortgage rates flap around, borrowers hit 'snooze' — and could lose

Doug Whiteman
·3 min read
As mortgage rates flap around, borrowers hit 'snooze' — and could lose
As mortgage rates flap around, borrowers hit 'snooze' — and could lose

Mortgage borrowing has stalled following recent increases in interest rates to the highest levels since last summer, according to a new report from a lenders group.

But homebuyers and homeowners shouldn't take their eyes off rates, because in the last few days they've gone down a bit — and are providing an opportunity to get cheaper loans.

Experts warn that it may it may not last. So if you're considering buying a home or refinancing an existing mortgage, you may want to seize the moment before rates resume their rise.

Mortgage demand goes flat

Arrow down and house with money on white wooden background. Falling market price of real estate.
ADragan / Shutterstock

Mortgage applications inched up by just 0.5% in the week ending Feb. 26, the Mortgage Bankers Association, or MBA, reported on Wednesday.

Demand went flat as mortgage rates took off.

"Mortgage rates jumped last week on market expectations of stronger economic growth and higher inflation. The 30-year fixed rate experienced its largest single-week increase in almost a year," says Joel Kan, the MBA's forecaster.

In the trade group's weekly survey, the average for a 30-year fixed-rate mortgage climbed to to 3.23% — the highest since July — from 3.08% a week earlier.

Amid the higher rates, refinance applications squeaked out just a 0.1% increase last week and were up a mere 7% from a year ago. Compare that to early January, when refinance demand was double what it had been at the start of 2020.

For the fourth week in a row, refi loans fell to a smaller share of all mortgage requests: They made up 67.5% of total loan applications, down from 68.5% a week earlier.

Rates are falling now, but it may be only a short reprieve

Rain Clouds in rainy season and the sun.
Ton2829 / Shutterstock

Homeowners considering a refi aren't the only ones who've been holding back because of rising mortgage rates. Applications for new, homebuyer mortgages — called "purchase loans" — edged up 2% last week and were just 1% higher than a year ago, the MBA says.

Note that this week, mortgage rates have been in a bit of a retreat, according to Mortgage News Daily.

Its daily survey of lenders shows 30-year fixed-rate mortgages fell to an average 3.14% on Tuesday, from 3.27% last Friday. If you're a would-be borrower, you may want to take advantage of this reprieve — because it may not last.

Don't wait for rates to go even lower. Signs are suggesting that "mortgage rates might move higher or hold steady," writes Peter Warden, editor of the website The Mortgage Reports.

Given the uncertainty, Warden is advising his readers to lock a mortgage rate today, whether they've got a loan that's closing in seven days or 60.

Mortgage rates have been rising along with the skyrocketing interest on Treasury bonds. Analysts say bond yields are being pushed up the vaccine rollout and other developments that should help the economy recover.

Rates too high? You need a reality check

Dark skinned couple in love looking at mortgage rates on a laptop computer while sitting on their living room floor.
GaudiLab / Shutterstock

If you're on the fence about taking out a home loan because you think rates have gotten too steep, here are a few numbers you need to see: The benchmark 30-year mortgage rate was averaging around 5% a decade ago, and 20 years ago it was topping 7%.

Millions of homeowners still have a chance to save hundreds of dollars a month by refinancing, the mortgage technology and data provider Black Knight reported recently.

You're considered a good refinance candidate if you've got a respectable credit score and the equity you've paid into your home represents at least 20% of its value.

To find the lowest rate out there — whether you're a refinancing homeowner or a homebuyer — it's crucial to shop around and compare at least five rate offers, because mortgage rates can differ broadly from one lender to the next.

Make sure to fall back on those comparison shopping skills of yours whenever it's time to buy or renew your homeowners insurance. Review prices from several insurance companies to find the best deal on your coverage.