Mortgage rates stay at record lows, and refinances erupt

Mortgage rates are lounging at record lows, and refinance requests are booming — at their highest levels since the early days of the pandemic, according to a pair of new reports.

Rock-bottom rates averaging less than 2.75% for a 30-year mortgage are enticing more borrowers to refinance their home loans. At today’s rates, homeowners can seriously slash their monthly mortgage payments and their lifetime interest costs.

But ultra-low mortgage rates might not stick around forever, as more COVID-19 vaccines move closer to approval and give financial markets a psychological boost.

A flood of new refis

Mortgage applications went up 3.9% in the week ending Nov. 20, led by a 5% jump in refinance applications, the Mortgage Bankers Association (MBA) reported last Wednesday.

"The ongoing refinance wave has continued into November,” says Joel Kan, the MBA’s forecaster. “Both the refinance index and the share of refinance applications were at their highest levels since April, as another week of lower rates drew more conventional loan borrowers into the market."

Last week’s refi requests were 79% higher than the same week one year ago, and increased to 71.1% of total mortgage applications, up from 69.8% the previous week.

Even as refinancing spikes, millions of homeowners have yet to join the party. More than 19 million mortgage holders could pocket savings averaging $309 per month by refinancing now, the mortgage technology and data provider Black Knight reported in mid-November.

“Mortgage rates remain at record lows and while that has fueled a refinance boom, it's been driven mainly by higher income borrowers,” notes Sam Khater, chief economist at the mortgage giant Freddie Mac. “Lower- and middle-income borrowers are leaving money on the table by not taking advantage of low rates.”

Good refi candidates — those with a solid credit score and at least 20% home equity — may need to hurry to lock in one of the best rates while they're still available.

Rates linger at all-time low

Mortgage rates were unchanged last week, after dropping to an unthinkable 2.72% for a 30-year fixed rate loan, Freddie Mac said Wednesday.

Rates are at their lowest since Freddie Mac began doing its weekly survey in 1971.

Mortgage rates initially popped when drugmaker Pfizer announced encouraging news about its coronavirus vaccine, as investors began imagining an economy returning to normal. But the increase was just a blip, as COVID infections soared, lockdowns returned across the country, and the government remained at an impasse over new relief measures.

“Weekly mortgage rate volatility has emerged again, as markets respond to fiscal policy uncertainty and a resurgence in COVID-19 cases around the country,” says MBA’s Kan.

Rates on other popular mortgages also are at or near near record lows, the Freddie Mac survey shows.

The average for a 15-year fixed-rate mortgage was unchanged last week at an all-time-low 2.28%. Those mortgages, often used for refinance loans, remain much cheaper than they were last year, when the average was 3.15%.

Rates on 5/1 adjustable-rate mortgage, or ARMs, surged to an average 3.16%, from 2.85% a week earlier.

An unseasonably warm housing market

Months of dirt-cheap mortgages have had homebuyers stampeding into the housing market. Applications for new mortgages — called “purchase loans” — climbed 4% in the mortgage bankers' latest report and are sitting 19% higher than this time last year.

Sales of new homes in October were up 41.5% from October 2019, the Commerce Department said last week.

“Builders have benefited from a lack of existing home supply and aim to ramp up their own production as prices have risen,” says Danielle Hale, chief economist at Realtor.com.

Whether you’re a homebuyer, or are a homeowner looking to refinance your existing mortgage, experts recommend that you gather and compare at least five mortgage offers to find the best deal — because rates can vary sharply from one lender to the next.

Be sure to put those same comparison shopping skills to work when you buy or renew your homeowners insurance. Get quotes from several insurers and review them side by side, to find the lowest price for your coverage.