Seasonal factors and a modest hike in mortgage rates combined last week to push both homeowners and prospective buyers out of the mortgage market, according to new data gathered before regulators dropped refinancing loan fees and drove rates down.
Ahead of the news, demand for both refinancing and mortgage purchases fell, as shown in a weekly poll by a leading trade group of lenders.
The retained borrowers were now rewarded with lower mortgage rates that could save them a lot of money…
Mortgage applications fell while rates continued to rise
Last week, the average for a 30-year fixed-rate mortgage – the most commonly used mortgage product in the United States – rose from 3.09% to 3.11%, according to the Mortgage Bankers Association.
Over the same seven days, the number of mortgage applications fell by 4%, MBA reported on Wednesday…
While higher numbers may have contributed to the decline, another factor could be that Americans are enjoying their first summer without COVID-19 restrictions since 2019. Hotel occupancy rates are returning to pre-pandemic levels, national parks are setting new attendance records – and borrowing may fade into the background.
The number of “purchased” mortgage applications sought by home buyers fell 6% from the previous week and 18% from the previous year. Refinancing applications were down 3% from a week earlier and 18% lower than in the same period last year.
“The activity of refinancing fell over the week, but since rates remained relatively low“The application acceptance rate was close to its highest level since the beginning of May,” says MBA Forecaster Joel Kahn.
The significant decrease in refinancing volumes compared to last year may not seem surprising. After all, mortgage rates have been at their lowest for a long time, and many homeowners have taken advantage of this. But recent Zillow poll found that 78% of eligible homeowners had never refinanced in the past year.
Among those who did it, 47% saved at least $ 300 per month.
A new reason to refinance homeowners
Refi’s activity in the next MBA report is expected to skyrocket as the process has become cheaper for millions of Americans.
On Friday, the Federal Housing Finance Agency – the agency that oversees mortgage giants Fannie Mae and Freddie Mac – announced that cancellation of refinancing commission it was introduced last year to help two government-sponsored businesses weather the pandemic.
The FHFA said its “unfavorable market fee” will be removed from August 1.
Fannie and Freddie buy most of the US home loans from lenders and pool them into investments. Since last fall, refinancing loans, which can be purchased by any of the companies, have cost an additional 0.5%.
“Eliminating unfavorable market refinancing fees will help families take advantage of low rates to save money,” FHFA Acting Director Sandra L. Thompson said in a press release.
Housing market observers said lenders were shifting commissions to consumers mainly in the form of higher mortgage rates. The FHFA announcement led to a sharp drop in rates.
According to Mortgage News Daily, the average rate on a 30-year fixed-rate mortgage fell from 3.04% on Thursday – the day before the news – to 2.87% on Tuesday. For 15-year loans that popular choice for refinancing, the average declined from 2.50% to 2.31% over the same period.
How to get the lowest mortgage rate
Yes, mortgage rates are still historically low – and continue to fall. But getting the most attractive rate from a lender often requires a little work, whether you are applying for refinancing or purchasing a mortgage.
Your history as a borrower will greatly influence the proposed rate, therefore take a look at your credit score for free and see if that’s impressive enough. Taking the time to improve your estimate is time well spent if it results in a lower mortgage rate.
Then, find the lowest mortgage rate available in your area and for the person with your credit profile. Research by Freddie Mac and others has shown that comparison of at least five mortgage offers this is the key to saving thousands of dollars on mortgages.
If you are not interested in the refi, there are other ways to lower the cost of home ownership. When it’s time to buy or renew homeowners insurance, view quotes from several insurers to make sure you don’t pay more than you owe.
And when you apply for a mortgage, keep in mind that lenders will need to see that you can make your monthly payments. They won’t have much confidence if you have multiple high-interest debt, such as credit card balances.
Combining them into a single low interest debt consolidation loan will reduce the total cost of your debt, help you pay it off earlier – and convince lenders that you do it as a homeowner.