Mortgage Refinance Demand Spikes 18% as Interest Rates Stabilize, MBA Says

Homeowners are rushing to refinance their home loans as the opportunity to lock in a low mortgage rate is running out.

During the week ending Jan. 28, mortgage refinance demand jumped 18% from the previous week, according to the Mortgage Bankers Association (MBA). Still, mortgage refinancing activity is much lower than it was this time last year due to higher interest rates.

Although mortgage interest rates are on an upward trajectory, many borrowers may still benefit from refinancing, said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

“There’s still demand there from people who are going to benefit from a sub-4% mortgage rate,” said Kan. “We’ve been so used to a 3% mortgage rate for the past couple years that a 3.7% rate seems high, but there are definitely people out there who have a higher rate.”

The MBA expects the average 30-year mortgage rate to reach 4.0% in 2022, which means that homeowners will likely see more rate volatility throughout the year if they decide to wait to refinance. Keep reading to determine if you can still save money by refinancing your mortgage before rates rise further. You can compare current mortgage refinance rates on Credible for free without impacting your credit score, so you can estimate your potential savings.

Mortgage rates are currently steady but are likely to rise soon

Average 30-year mortgage rates spiked in the beginning of 2022 and have been hovering around 3.55% for the past three weeks, according to Freddie Mac. Rates also significantly increased in January for the 15-year loan term, which is popular among homeowners who are refinancing. Average 15-year mortgage rates have stabilized in recent weeks, though, currently sitting at 2.77%.

Although mortgage rates have remained stable in the past several weeks, they’re expected to rise further as the Federal Reserve continues to revise its monetary policy and rises the benchmark rate in 2022. The MBA’s Mortgage Market Forecast predicts that 30-year mortgage rates will average 4.0% in 2022 and 4.3% in 2023.

“I wouldn’t be surprised if we saw some weeks when rates dropped and refis increased between now and then,” Kan said.

With Fed rate hikes anticipated as early as March, it may be wise for homeowners to consider refinancing now to lock in a relatively low mortgage rate. You can visit Credible to compare rates across multiple mortgage lenders at once, so you can find the best offer possible for your financial situation.

Nearly 6M homeowners can still benefit from mortgage refinancing

Despite rising mortgage rates, about 5.9 million “high-quality” candidates could still save an average of $275 per month by refinancing their home loans, according to Black Knight. More than 1 million of these homeowners could save at least $400 on their monthly mortgage payments, and 661,000 of them could save $500 or more per month.

That’s because mortgage rates are still relatively low compared where they were a few years ago. Although the time to lock in a record-low mortgage rate may have passed in 2021, current mortgage rates are still much more favorable than in 2018 when they reached nearly 5%.

If you’re still paying a 5% mortgage interest rate, you may have the opportunity to save money on your monthly payments by refinancing to a lower interest rate or shorter loan term. Plus, it may be beneficial to tap into record-high levels of home equity with a cash-out refinance.

You can browse rates from several mortgage loan lenders in the table below, and use Credible’s mortgage calculator to estimate your monthly payments.

Source: Mortgage refinance demand spikes 18% as interest rates stabilize, MBA says | Fox Business

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Critics:

Rising interest rates are causing big headaches for mortgage lenders, especially those who depend most on refinance business. Demand is simply drying up.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 3.72% from 3.64%, with points decreasing to 0.43 from 0.45 (including the origination fee) for loans with a 20% down payment. That rate was 77 basis points lower the same week one year ago.

As a result mortgage refinance applications, which are highly sensitive to daily rate moves, fell 13% for the week and were 53% lower year over year, according to the Mortgage Bankers Association’s seasonally adjusted index. Rates have now been moving higher for five straight weeks.

“After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance,” wrote Joel Kan, an MBA economist, in a release. “Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them.”

Mortgage applications to purchase a home fell just 2% for the week and were 11% lower than a year ago. Buyers are actually more active now than usual, as some are hoping to get a jump on the popular spring market. With mortgage rates rising, and home prices still soaring, some are concerned they will no longer be able to afford the home they want.

At an open house last Sunday in Waldorf, Maryland, there were already three offers before potential buyers were even let in the door to have a look.

“We thought that because of the winter months that it would slack off a little bit, prices would start to come back down to normal, but that’s not happening. It’s anguish, it’s pain, it’s agony,” said Rondie Robinson, who was house hunting with his wife and daughter.

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