Mortgage demand cools as borrowers overlook historically low rates

Ethan Rotberg
Mortgage demand cools as borrowers overlook historically low rates
Mortgage demand cools as borrowers overlook historically low rates

Mortgage requests are slumping, as rising rates have muffled the enthusiasm of borrowers, a new report shows.

Though rates have been lifted to their highest levels in months, it's not a good time for sitting on the sidelines. Mortgage rates remain extraordinarily low compared to a year ago — and by historical standards. Homebuyers can still get cheap loans, and millions of homeowners can still refinance and cut their monthly payments.

Forecasters are predicting slightly higher rates moving forward, which should give would-be borrowers plenty of motivation to stop procrastinating.

Mortgage applications dip

Serious man and woman calculating bills, using calculator and laptop, online banking services, family discussing and planning budget, focused wife and husband checking finances together
fizkes / Shutterstock

Overall mortgage applications decreased 4.1% in the week ending Jan. 22, the Mortgage Bankers Association (MBA) reported Wednesday.

The trade group also says its survey of lenders shows the average for a 30-year fixed-rate mortgage jumped to 2.95%, from 2.92% the week before.

The dip in mortgage requests is “a sign that borrowers are increasingly more sensitive to higher rates,” says Joel Kan, MBA’s forecaster.

The decline was led by refinance applications — which had been on a hot streak this winter. Refi demand went down 5% but was still 83% higher than during the same time last year. Applications for new mortgages — called “purchase loans” — decreased 4% last week, the MBA says, but were still up 16% versus the same week a year ago.

Low rates remain within reach

Top view photo of beautiful little girl lying on green grass and dollars. Girl reaching hands to camera
Friends Stock / Shutterstock

Though the MBA’s survey shows 30-year rates climbed to their highest level since November, rates on 15-year fixed-rate loans — a popular option for refinancing — fell to an average 2.43% last week, from 2.48%, the survey says.

Meanwhile, more up-to-date numbers from Mortgage News Daily’s (MND) survey of lenders indicate 30-year mortgage rates have been easing after hitting a mid-month high, meaning borrowers shouldn’t assume that the days of ultra-low rates are done.

Rates had been surging on signs Washington might embark on a spending bonanza, but doubts are now emerging about just how quickly Congress will be able to agree on President Joe Biden’s $1.9 trillion relief package says Matthew Graham, chief operating officer of MND.

“Beyond politics, the core consideration of 'COVID vs. the economy’ is still a thing,” Graham points out. “Jobs haven't remotely recovered from pre-COVID levels.”

Major savings still possible

Beautiful Young Girl Runs Toward Her Boyfriend to Catche Him and Embrace. Two Young People in the Backyard of a Garden on a Hot Summer Day.
Gorodenkoff / Shutterstock

According to mortgage giant Freddie Mac’s most recent forecast, rates on 30-year loans are expected to come close to 3% this year, meaning borrowers are at risk of missing out on near-record lows.

More than 19 million mortgage holders can still save an average $308 per month by refinancing now, says mortgage technology and data provider Black Knight.

Good refi candidates need a solid credit score and at least 20% equity in their homes to score the best rates — plus, they’ll need to shop around.

Studies from Freddie Mac and others have shown when you compare at least five rate quotes, you can save thousands of dollars over the life of your loan.

If you wait too long, you’ll need to spot savings elsewhere. Do a bit more comparison shopping when you buy or renew your homeowners insurance, and you could save hundreds of dollars a year for the coverage you need.

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