Mortgage rates have slipped — and have fueled a new surge in refinancing.
Applications for refi loans just jumped, after rates declined for the first time in weeks, according to a new report from the country’s largest mortgage trade association.
But the group warns that holdout homeowners may not have much time left to grab a cheap rate that could save them a great deal of money.
Refinance requests take off
During the week ending Dec. 3, applications for mortgages rose 2%, led by a 9% boost in refinance demand, the Mortgage Bankers Association reported on Wednesday. In the previous week's report, refi applications sank 15%.
Interest in refinance loans heated up again as the average for a 30-year fixed-rate mortgage edged down to 3.30% in the MBA's weekly survey, from 3.31% a week earlier.
"Mortgage rates declined for the first time in a month, prompting a pickup in refinancing, with government refinances increasing more than 20 percent over the week," says Joel Kan, the mortgage bankers' chief forecaster. A sharp decline in rates on FHA refi loans drove a big increase in government refinances.
Meanwhile, demand for the home purchase loans sought by homebuyers dropped 5% last week, the MBA says.
Refinances rose to 63.9% of all mortgage applications, from 59.4% the previous week.
A shrinking 'window of opportunity'
Homeowners who rushed to take advantage of last week's lower rates made a smart move, because Americans may not get many more chances to score deep refinance savings, Kan says.
"Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller," he says.
Many homeowners have been stubbornly slow to refi. A recent Zillow survey found 78% of eligible homeowners didn't leap at the ultra-low rates of the pandemic's first year. Among those who did refinance, nearly half saved at least $300 a month.
Though mortgage rates been pushing their way higher, they remain historically low — and far lower than they were before COVID-19. In mid-December 2019, the mortgage bankers put the average 30-year mortgage rate at 3.98%.
The trade group expects rates to hit 4% by the end of 2022 as the economy continues its recovery from the virus.
How to secure the lowest refinance rate
If you've put off refinancing your mortgage, you're probably leaving money on the table. Even a refi that results in monthly savings of "only" $100 would put $6,000 back in your pocket over five years.
Just keep in mind that a lender may not automatically offer you the lowest interest rate available. That usually requires a little bit of effort on your part.
A good first step is to check your credit score, which you can easily do for free. The lowest mortgage rates tend to go to borrowers with the highest scores.
When you're ready to move forward with a refinance, check mortgage rates from at least five lenders to find the best loan available in your area and for a borrower with your credit profile.
If a refi isn't possible or something you want to do, there are other ways to cut the cost of homeownership. When it's time to renew your homeowners insurance, get quotes from multiple insurers to make sure you're not overpaying.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.