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Mortgage rates recently hit a new record, and owners and buyers have taken note. As the data from Mortgage Bankers Association reveals, the number of refinancing applications increased during the week ending Dec. 11, as did the number of applications for mortgages to buy homes.
This means that more Americans are taking the opportunity to get a mortgage at the lowest rates in over 50 years – and lower their bills in the long run. And the good news is that those who haven’t taken action yet have the option of getting an extremely affordable home loan.
Mortgage applications on the rise as rates fall
For the week ending December 11, the Composite Market Index was up 1.1% from the previous week on a seasonally adjusted basis. This index measures the volume of mortgage applications.
The increase in mortgage applicants over the past week was due to more people refinancing as well as more first-time loan applicants. , both on a seasonally adjusted basis.
While there has been a larger increase in the number of prospective homeowners applying for new loans than in current homeowner refinancing, refinancing remains the driving force behind the overall huge increase in mortgage demand this year.
In fact, the refinancing index was 105% higher last week compared to the same week in 2019, while the buy index was only 26% higher than in 2019. Loans refinancing now accounts for 72.27% of all mortgage applications, up from 72% the week before.
There is a good reason. Current homeowners are in a better position to take advantage of today’s extremely low mortgage rates, since they don’t have to buy a new home to do so. Current homeowners can reduce their mortgage payments by hundreds of dollars simply by completing the paperwork to get a new loan at a lower rate (assuming they qualify based on credit and income).
Those who don’t own a home may want to buy soon for an affordable mortgage at an unprecedented low rate. But they can run into difficulties – house prices have risen rapidly and the number of available properties hit their lowest level in 38 years.
It should be noted that those hoping to refinance may find it less attractive if lenders raise rates in response to new fees imposed by Fannie Mae and Freddie Mac, two government-sponsored entities that buy mortgages in the secondary market. But not all refinancing loans are affected by these fees and, because the rates are so lowit may still make financial sense for current homeowners to get a new loan even with the fees.
And the good news is that the Federal Reserve has announced that it will keep the benchmark interest rate low (this is the rate at which banks borrow from each other) and that it will continue to purchase mortgage-backed securities and bonds. This means mortgage rates are likely to stay low for some time, and the possibility of getting an affordable home loan is expected to persist into 2021.
If you’re not one of the many Americans who refinanced a loan or got a mortgage to buy a home, ask yourself if the time is right. Of course, you have to be able to buy a home or qualify for a refinance loan at a competitive rate. But if you are, there may never be a better chance of joining the growing number of people who have been applying for the cheapest mortgages in years.