According to MBA research, the mortgage market is slowing due to higher interest rates during the short holiday week.

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Mortgage rates started to rise last week and then fell again. This surge has caused a slowdown in the growth of new mortgage applications, especially for mortgage refinancing. (iStock)

According to the latest report by the Mortgage Bankers Association, the mortgage market has slowed slightly over the week of Memorial Day. weekly review of mortgage applications

The study measured mortgage applications for the week ended June 4, 2021 and found a seasonally adjusted 3.1% decline per year. That’s because while mortgage rates ended up dropping slightly, that rate change didn’t happen until the end of the week. For the rest of the past week, mortgage rates rose, offering homeowners less incentive to refinance a home loan.

With low interest rates and an increase is projected at the end of this yearHomeowners should take advantage of today’s rate conditions by considering whether refinancing is right for them. Contact Credible to find out what your new mortgage rate might be – and potential savings.

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Are mortgage refinancing becoming less popular?

The share of refinancing fell 5% last week and 27% year on year, but not all of this is due to market conditions. Experts explained that since Memorial Day was a different week last year, the holidays slowed down significantly mortgage refinancing applications compared to a full week without days off last year.

But this is not the only thing that has increased the number of mortgage applications every year.

“Because fewer homeowners were able to take advantage of the lower rates, the refinancing rate fell to its lowest level since April,” said Joel Kahn, MBA’s assistant vice president for economic and industry forecasting. “Purchase requisitions rose slightly in the past week, with a significant annualized decline as a result of Memorial Day 2021 being compared to a week without holidays, as well as a significant increase in the number of applications observed in May last year after the restrictions imposed by pandemic. “

In general, the share of refinancing of mortgage activities decreased to 60.4% of the total number of applications for mortgages, compared with 61.3% in the previous week.

But today’s mortgage rates stay much lower 3% for the fifth consecutive week on a 30-year fixed-rate mortgage averaging 2.75%.

If you want to know how much you can save with a lower interest rate, check the plausibility to compare several creditors at once.

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By comparison, back in April, when mortgage rates were still above 3%, Black Knight reported that about 13 million homeowners could still benefit from refinancing their mortgages, saving about $ 283 a month each.

The Black Knight has identified these homeowners as owners with a credit rating of 720 or higher, who own at least 20% of the equity in their home, have ongoing mortgage payments, and can lower their interest rate by at least 0.75 percentage points. But there is more programs available today, which would allow homeowners who have not met these thresholds to benefit from refinancing.

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Rising interest rates and house prices hinder affordability

The MBA report showed that the average loan amount has decreased slightly, but remains significantly higher than the average over the past year. as house prices rise

“The average loan for a purchase application has dropped to $ 407,000, below the record $ 418,000 set in February, but still well above the 2020 average of $ 353,900,” Kahn said. “The growth in house prices continues to accelerate, which is due to a favorable demographic situation, the recovery of the labor market and the economy, as well as the fact that the demand for housing is much higher than the supply.”

In April, home prices rose 14.8%, according to the latest Black Knight mortgage monitoring report, the highest growth ever seen by a company that monitors the mortgage market since the mid-1990s. This marks a 17 straight month increase in home prices and reduces housing affordability. In early June, the share of home buyers in the average income needed to buy a home at an average price exceeded the five-year average of 20.1% to 20.5%.

“In recent years, 20.5% has been about the tipping point where currency gains start to slow down, but given the severity of the stock shortage, house prices – at least for now – have continued to skyrocket even as affordability has tightened.” , – he said. said Ben Graboske, Black Knight’s president of data and analytics.

While this poses problems for home buyers, homeowners benefit from higher home prices. For many, increasing home equity is another reason refinancing their mortgage can be beneficial – for example, if they want to cancel mortgage insurance that remains in the FHA loan but falls off the regular loan after reaching a 20% stake in the home.

If you are a homeowner and want to know how to benefit from mortgage refinancing, visit Credible to compare prices from multiple lenders and get pre-approval in just a few minutes.

The upward trend in house prices cannot last long

But the rapid rise in the value of a home can be volatile. Black Knight explains why in these scenarios:

  • If the appreciation remains at current levels and the 30-year rate slowly climbs to 3.5% by the end of 2022, then the country’s payments-to-income ratio will reach 21.6% by the end of this year and 25% by 2022. 4% by the end of 2022, availability will be 22% by the end of this year and 26.7% by the end of 2022.
  • If home values ​​continue to rise at their current pace and 30-year rates rise to 4.5% by the end of next year, then the payments-to-income ratio will rise to 22.5% by the end of this year and surpass 28% by the end of next year. end of 2022.

The Black Knight explained that higher rates and tougher affordability could ultimately lead to a slowdown in house price growth. But given today’s housing shortage, this may not happen for a while.

Aside from home prices, interest rates are projected to rise by the end of this year and into 2022 – and there are still millions of homeowners who can benefit from refinancing their home loan.

To see if you can take advantage of the current low rates, contact Credible to speak with a mortgage specialist and get your questions answered today.

Have a financial question but don’t know who to contact? Email the Safe Money Expert at moneyexpert@credible.com and your question can be answered by Credible in our Money Expert column.

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