As mortgage rates fall, homeowners miss a new chance to refinance and save

Clayton Jarvis
·4 min read
As mortgage rates fall, homeowners miss a new chance to refinance and save
As mortgage rates fall, homeowners miss a new chance to refinance and save

Mortgage rates have receded back below 3%, but that hasn't been enough to entice homeowners or house hunters into the mortgage market. Applications for both refinance and home purchase mortgages fell last week, according to a new report from a major mortgage industry trade group.

A scorching, undersupplied real estate market is contributing to the decrease in purchase applications, but homeowners holding off on refinancing don’t really have a comparable excuse.

With the typical mortgage rate still historically low, over 14 million homeowners have opportunities to save an average $287 a month with a refinance, the mortgage technology and data provider Black Knight recently said.

Both the field of refi candidates and the average savings will inevitably start shrinking once mortgage rates climb back to their pre-pandemic levels.

Mortgage demand dips, despite low rates

House and calculator
karen roach/Shutterstock

Mortgage applications experienced an overall decline of 1.8% last week, according to data released by the Mortgage Bankers Association on Wednesday. It was the second week in a row in which applications for both refinance and purchase mortgages fell, and it marked the lowest level of application activity since the beginning of 2020.

After dropping 8% in the MBA’s previous survey period, refinance applications shed another 2% last week. That’s despite the average rate on a 30-year fixed rate mortgage — the most popular mortgage product in the U.S. — falling to 2.98% last week, according to mortgage giant Freddie Mac. (This week, it's down to 2.90%.)

Rather than signaling the end of America’s refinance boom, the dip in refi demand is more of a seasonal phenomenon, says Maria Fregosi, chief investment officer with mortgage lender Homepoint Financial.

"It was a holiday week," Fregosi says. "We usually see lower applications as people focus on other activities. We expect to see an uptick in applications this week."

There may also be some market fatigue at work, says Corey Burr, senior vice president at TTR Sotheby’s International Realty in Washington, D.C.

“Millions of Americans have refinanced or purchased in the last 15 months at rates very close to current rates," Burr says. "Jockeying the market to save an eighth or a quarter of a point is not a priority right now."

Borrower beware: Higher mortgage rates ahead

Plant shaped like arrow
Khakimullin Aleksandr/Shutterstock

Saving a fraction of a percent may not be a priority for homeowners if they expect rates to continue hovering around historic lows for the foreseeable future, but that's probably not going to happen.

"If the 30-year fixed drops to 2.5% or 2.625%, that will lead to a new wave of refinances," Burr says, "but don't bet on it, as the improving economy will put upward pressure on rates. The thought that rates will drop significantly below 3% is wishful thinking."

Recent signs of a recovering economy, like last week's report of stronger-than-expected in hiring in June, have not pushed mortgage rates higher. The yields (interest) on Treasury bonds have fallen, taking fixed mortgage rates with them. Fregosi expects rates to remain below 3% until the 10-year Treasury yield starts improving.

That may not take long.

"If we continue to have inflation fears, you will see the benchmark Treasury rate go up, and mortgage rates go up too," she says.

Because of the looming increases in rates, Fregosi says homeowners should consider refinancing sooner rather than later.

"Rates are low and mortgage companies are not at the capacity levels they were at during the pandemic, so service levels are also high," she says. "Assuming you plan to stay in the house long enough to cover the closing costs, refinancing makes sense now."

Snag a low refi rate while you still can

Couple and agent
fizkes/Shutterstock

Despite the pandemic's ultra-low mortgage rates, 78% of eligible homeowners did not refinance their mortgages in the year ending April 2021, a recent Zillow survey found. If you've put off taking out a new home loan, you could be leaving a lot of money on the table.

Once you finally decide to refinance your home, you’ll want to check mortgage rates from at least five lenders to find a loan that fits your budget.

But note that a lender may not automatically offer you the lowest interest rate available. That usually requires a little bit of effort on your part.

You'll want to be seen as a good risk — which can be tough if you’ve got a pile of high-interest debt. Taking out a debt consolidation loan can help you reduce both the number of payments you make each month and the amount of interest you're paying.

You’ll erase your debt faster and improve your cash flow, two things lenders like to see.

Don’t get too down if a refi isn't possible, because you have other ways of cutting the cost of homeownership. When the time comes to buy or renew homeowners insurance, for example, make sure you get quotes from multiple insurers. It’s quick, easy and could save you hundreds of dollars.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting

Recommended Stories

  • U.S. mortgage application volumes at lowest since early 2020 -MBA

    The number of applications for home mortgages decreased last week to the lowest level since early 2020, dampened by declines in refinancing activity and purchase applications. The Mortgage Bankers Association (MBA) said on Wednesday its seasonally adjusted market index fell 1.8% in the week ending on July 2 from a week earlier, leaving it at to the lowest level since January 2020. This reflected a 2.3% decrease in applications to refinance existing loans and a 1.1% drop in applications to purchase a home.

  • Even with some mortgage refi rates under 3%, consider these 8 things before you refinance your mortgage

    Mortgage refinancing rates are very low right now, with some rates starting at below 3% as of the writing of this article (you can compare today’s best refi rates here). Indeed, “while rates continually fluctuate, they have dipped to record-setting lows this year,” says Alfredo Padilla, a spokesperson for Wells Fargo home lending. What’s more, many experts expect interest rates to rise this year, so now may be the time to act.

  • Dow futures drop over 500 points, Bitcoin falls below $33K

    On Thursday, the benchmark 10-year Treasury yield sank further to hover around 1.26% amid recovery concerns. In the crypto space, the price of popular currencies such as Bitcoin and Dogecoin continued to fall.

  • Fed officials discussed potential reduction in stimulus

    Federal Reserve officials started discussing at their meeting last month the timing and mechanics of reducing their huge monthly bond purchases, which are used to keep longer-term interest rates in check. The debate, revealed in the minutes of the Fed’s June meeting released Wednesday, reflected a broadly positive outlook on the economy among Fed policymakers but also some concern that higher inflation could prove more persistent than the central bank has previously indicated. The Fed is buying $120 billion a month in Treasury securities and mortgage-backed bonds to keep longer-term interest rates low and encourage more borrowing and spending.

  • American Airlines saw big jump in travel over July 4 weekend

    American Airlines says it carried nearly three times as many passengers over the July 4 weekend than it did over the holiday last year, the latest sign that travel — at least within the United States — is continuing to rebound from pandemic lows of 2020. American said Wednesday that it carried nearly 2.7 million passengers on more than 26,000 American and American Eagle flights between last Thursday and Monday. The airline did not provide comparisons with 2019, but the Transportation Security Administration screened 10.1 million travelers in the same five-day period, down 17% from the comparable period in 2019.

  • Ladies of ‘BET Presents: The Encore’ react to Aubrey O’Day’s absence in episode 5

    BET Presents: The Encore is getting ready to air its fifth episode Wednesday, and theGrio has an exclusive clip from the upcoming episode. As theGrio previously reported, BET Presents: The Encore is one of the biggest reality shows on television this summer.

  • Unruly teenagers refused federal mask mandate on flight

    An American Airlines flight to the Bahamas was canceled on Monday after witnesses said a group of about 30 high school students from Boston staged a mask rebellion.

  • Paris Hilton Defends Britney Spears’ Comments About Her

    Paris Hilton has emerged as one of Britney Spears’ staunchest defenders. On Monday’s episode of her “This Is Paris” podcast, Hilton addressed Spears’ remarks during her conservatorship hearing in which she referenced the heiress, saying, “The Paris Hilton story on what they did to her at that school. I didn’t believe any of that either — I’m sorry. I’m an outsider.” “And maybe I’m wrong, and that’s why I didn’t want to say any of this to anybody to the public,” Spears continued. “People would ma

  • Bollywood Star Alia Bhatt Signs With WME

    EXCLUSIVE: Alia Bhatt, one of Bollywood’s top movie stars whose credits include the film Gully Boy that became India’s submission for the 2020 Oscar race, has signed with WME in all areas as she eyes opportunities in the U.S. Bhatt, the daughter of Bollywood filmmaker Mahesh Bhatt and actress Soni Razdan, has won four FilmFare […]

  • Aerial images of expanding graves capture Indonesia's deadliest days

    A morbid grid of graves widens as excavators dig deep, piling up soil to make space for Indonesia's pandemic dead to be laid to rest. Ambulances, lights flashing, deliver bodies to the Jakarta burial site as trucks carry away dirt beside rows of rectangles carved out of the brown earth. Dramatic drone footage of the Rorotan cemetery in Indonesia's capital gives a chilling glimpse into a worsening epidemic that has seen deaths and infections soar in recent weeks, pushing hospitals to their limits.

  • Homeowners: Results from the Zillow Consumer Housing Trends Report 2021

    The 2021 Consumer Housing Trends Report (CHTR) provides a snapshot of what housing consumers are thinking and doing in mid-2021. In this report, we take a deeper look at homeowners The post Homeowners: Results from the Zillow Consumer Housing Trends Report 2021 appeared first on Zillow Research.

  • The Stock Market Is Cracking as Investors Flee to Bonds

    Jitters around rich valuations, potentially waning fiscal and monetary stimulus, and lingering coronavirus denting reopening hopes were among the factors to blame.

  • Regent Seven Seas has unveiled a 4-month world cruise that will stop at 61 World Heritage Sites. Tickets start at $73,500, and $200,000 gets you a suite with a personal butler

    Passengers for the "Moments In Time" cruise will travel on the 709-foot Seven Seas Mariner ship, which has eight decks and 445 crew members on board.

  • Microsoft and Amazon could both come out on top now that Project JEDI is dead

    The Department of Defense killed project JEDI, but Microsoft and Amazon still have a chance to win its lucrative replacement.

  • Apple founder Steve Wozniak backs right-to-repair movement

    "We wouldn't have had an Apple had I not grown up in a very open technology world," Mr Wozniak said.

  • Four suspects killed, two others arrested in murder of President Moïse, Haiti police say

    Haiti’s National Police killed four of the suspected assailants allegedly behind the assassination of President Jovenel Moïse Wednesday morning and arrested two others, while the department had the other killers trapped and they were exchanging gunfire, the agency’s interim chief said late Wednesday.

  • Tennis-Barty beats Kerber to reach first Wimbledon final

    Top seed Ash Barty became the first Australian woman to reach the Wimbledon singles final for 41 years after beating former champion Angelique Kerber 6-3 7-6(3) on Thursday. The 25-year-old will now aim to emulate Evonne Goolagong who won the second of her two Wimbledon crowns in 1980. After saving a break point in a nervy opening game on a sunny Centre Court, world number one Barty was supreme in the first set as her all-court game flowed on the grass.

  • Chinese ride-hailing firm Didi sued in US as shares slide

    The lawsuits come after a crackdown by Beijing triggered a slump in its share price of more than 20%.

  • Festival with Luke Combs, Carrie Underwood sparks COVID outbreak, Colorado officials say

    It’s reportedly the largest music festival in Colorado.

  • U.S. economy is in ‘peak growth’ and is ‘nearing peak inflation’: economist

    Oxford Economics Chief U.S. Economist, Greg Daco, joins Yahoo Finance to discuss the Delta variant’s possible effect on the economy and how the market will adjust for the cooling period as the U.S. economy passes peak growth and peak inflation.