Mortgage rates under 3% sure are an attention-getter.
Homeowners have noticed the history-making lows for rates on 30-year mortgages, America's most popular type of home loan, and they're refinancing at more than double the pace of a year ago, according to a new report.
It was released Wednesday morning — just hours before rates fell again, to yet another new all-time low in a daily survey.
When you own a home and refinance your mortgage at a record-low rate, you take out a new loan, pay off your existing one, and enjoy big savings that can open up a lot of room in your family budget.
People shopping for houses also are chasing after low-rate mortgages as they go on a buying blitz. Sales of previously owned homes just saw a record one-month increase, another new report shows.
Homeowners run after refi savings
Overall mortgage applications rose 4.1% in the week ending July 10, with a 5% jump in refinance requests leading the way, the Mortgage Bankers Association, or MBA, said Wednesday. Compared to a year ago, demand for refi loans was up an impressive 122% .
The rush to refinance has been fueled by mortgage rates that are sinking to new all-time lows under 3%.
Hours after the mortgage bankers released their data, Mortgage News Daily reported a new all-time low average for 30-year fixed mortgage rates: just 2.88%. Last week, the nearly 50-year old survey from mortgage giant Freddie Mac put rates at a record 2.98%, on average.
The deeply discounted rates are being offered to "creditworthy borrowers," says Joel Kan, the MBA's associate vice president of forecasting.
Mortgage rates have been diving into the deep end of the pool as the Federal Reserve has slashed interest rates to fight the current recession, and as coronavirus chaos on the financial markets has pushed down the interest on Treasury bonds. Mortgage rates tend to track the yield on the 10-year Treasury note.
A refinance at today's extremely low mortgage rates can shave down a homeowner's monthly payment and lifetime interest costs. More than 16 million homeowners could save an average $283 a month by refinancing, according to a recent study from mortgage data firm Black Knight.
"Every move lower in mortgage rates opens the door for some homeowners where it now makes financial sense for them to refinance," says Danielle Hale, chief economist at Realtor.com.
Homebuyers step up their borrowing, too
Homeowners weren't the only ones borrowing more last week. Applications for the "purchase loans" used by homebuyers rose 2%, and demand was up a healthy 19% compared to the same week in 2019.
"There continues to be strong homebuyer demand this summer, as home shoppers have returned to the market in many states," Kan says.
Here's another sign of how homebuyers are stampeding back into the housing market, after quarantining through the spring: Sales of previously owned homes skyrocketed 20.7% from May to June. It was the biggest monthly increase on record, the National Association of Realtors, or NAR, said Wednesday.
Americans are snapping up houses, even though there are fewer to go around. Buyers are deciding not to sell, either because they're leery of putting their homes on the market during the pandemic, or because they're grabbing low mortgage rates and are refinancing.
So, the number of houses up for sale in June was down 18.2% from a year ago. The shortage is putting pressure on prices.
"Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply," says Lawrence Yun, the NAR's chief economist.
If you're shopping around for a house and are fortunate enough to find something in your price range, you'll next want to comparison shop for your mortgage — to find one of those rates under 3%. Get loan offers from a bunch of lenders and review them, because rates can vary widely.
Use the same tactic when it's time to buy your homeowners insurance. Go online, get several home insurance quotes and compare them, so you're sure you're getting the right coverage at the best price.