U.S. Markets closed

Refinances Rise Again as Homeowners See Opportunities to Save

Doug Whiteman
Refinances Rise Again as Homeowners See Opportunities to Save

Mortgage refinances are heating up again, after cooling off for a couple of weeks. A lenders trade group says homeowners are having a look at today's low mortgage rates and are seeing opportunities to cut their monthly payments.

With rates at their lowest levels in years, lenders remain much busier than they were a year ago. Last week, they received about two and a half times more refinance applications than they did during the final week of October 2018.

Some homeowners have found it's worth their while to refinance home loans they took out just last year.

Mortgage applications steady, though refis rise

Mortgage applications overall were flat last week, down an ever-so-slight 0.1% from the previous week, the Mortgage Bankers Association reported Wednesday.

But refinance applications rose 2% from a week earlier, after slipping for two weeks. And, last week's refi activity was up a stunning 144% compared to the equivalent week in 2018.

Refinancings accounted for 59.5% of all mortgage applications last week, increasing from 58% a week earlier.

The number of mortgage purchase applications — that is, for loans to buy homes — fell 3% last week. But they were 7% higher versus the same time last year.

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

The impact from mortgage rates

Andrii Yalanskyi / Shutterstock
Mortgage rates have fallen to their lowest levels since the fall of 2016.

Homeowners have been finding attractive refinance rates as yields have fallen on U.S. Treasury securities, says Joel Kan, associate vice president of forecasting for the Mortgage Bankers Association.

Mortgage rates tend to track the interest rates on Treasurys.

The dip in mortgage purchase applications reflects challenges that first-time homebuyers are encountering, Kan says. More established buyers are having an easier time.

"Amidst persistent supply constraints in the entry-level price range, there's evidence that high-end homebuyers are more active this fall," says Kan. "The average loan size for purchase applications increased to its highest level since May."

According to the closely followed survey from mortgage giant Freddie Mac, mortgage rates rose nationwide last week, for the third week in a row.

The average for a 30-year fixed-rate mortgage climbed to 3.78%, from 3.75% the previous week. Rates on 15-year fixed-rate mortgages, which are a popular refinancing option, inched up to an average 3.19%, from 3.18%.

The outlook for mortgages

Freddie Mac is scheduled to release fresh mortgage rates data on Thursday.

The benchmark 30-year mortgage rate is likely to stay low — at an average 3.7% — through the end of 2019, according to Freddie Mac's current forecast. The company predicts just slightly higher rates — averaging 3.8% — during 2020.

Though rates have been moving higher in the Freddie Mac survey, they're still down considerably versus this time last year.

On average, you can get a 30-year mortgage more than one full percentage point below the rates offered in October 2018, and Freddie Mac has said refinancers this year have been saving about $1,700 a year in interest costs.

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