Mortgage applications rise as rates fall
The number of people applying for mortgages has increased recently, according to the Mortgage Bankers Association. For the week ending June 11, 2021, there was a 4.2% increase in mortgage applications from the previous week, even after adjusting for the impact of Memorial Day vacations during the week. former.
The reason why requests increased last week, whereas they had decreased during the previous three weeks? Rates have come down and current homeowners and potential buyers have decided to take advantage of lower borrowing costs to obtain more affordable home loans.
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A drop in rates leads to an increase in mortgage applications
According to the Mortgage Bankers Association, mortgage applications rose sharply last week due to lower rates for 30-year fixed-rate loans. This was true for both purchase and refinance loans. Some rates have hit recent lows, although they are still up from record rates and lowest in the heart of the pandemic.
While there have been more applications for home purchase mortgages and refinancing loans that pay off existing home loans, refinancing activity has been particularly strong. In fact, there was a 5.5% increase in refinancing requests for the week ending June 11 compared to the overall 4.2% increase in purchase and refinancing requests.
The reason mortgage refinancing requests have increased more dramatically in response to lower rates is that people who refinance do not need to find a new home to buy to take advantage of lower mortgage rates. They already have their home and existing home loan, so refinancing can save them money if they can qualify for a new loan at a competitive rate.
In contrast, to take advantage of falling mortgage rates for new home purchases, borrowers should be prepared to apply to a mortgage lender to purchase a new property. In many parts of the country there are few properties available and prices have skyrocketed. This is one of the main reasons why the total number of purchase requisitions is drastically down from the previous year. It’s also an explanation why requests for new loans have not increased as much as requests for refinancing did last week – despite the overall decline in average rates.
Refinancing accounts for around 61.7% of mortgage business, as many homeowners can save on their current home loan by refinancing, especially when rates fall. For homeowners who haven’t recently refinanced, it’s worth looking at average interest rates and determining if the recent drop in the cost of borrowing would be a good opportunity to save.
Those looking to buy new properties, on the other hand, may find it frustrating that they don’t necessarily immediately take advantage of the recent drop in rates to secure a home loan. But many lenders allow you to lock in a loan rate for a period of time before you even find a specific property to buy. Consider whether it is worth doing this if you are happy with the rate trend.