Even though the U.S. economy remains burdened by the pandemic, prospective homebuyers and those seeking to refinance their existing mortgages are in for some good news.
Following a two-week dip, mortgage applications saw a surge of 8.2%, according to the recent report by the Mortgage Bankers Association (MBA) for the week ending Jan. 29, 2021.
Mortgage refinancing jumps to the highest level since March 2020
Applications to refinance existing mortgages rose 11% last week from the previous week with the demand at 59% higher than the same week one year ago. MBA’s refinance index hit its highest level since March 2020, rocketing 60% year-over-year.
Low mortgage rates contributed to the increased refinancing activity as they provide a money-saving opportunity for homeowners with existing mortgages.
“The one-week reversal in the recent upswing in rates drove an increase in both conventional and government refinance activity, as borrowers continue to lock in these historically low rates,” says Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association.
Affordable rates for existing mortgages
Mortgage buyer Freddie Mac reported showed that the rate on a 30-year fixed mortgage remained flat at 2.73%, the same level as last week. Last year, the rate stood at 3.45%. The average interest rate on the 15-year fixed mortgage, a popular refinancing option for homeowners, moved to 2.21% from 2.97% last year.
The record low rates are also indicative of an “economy that continues to struggle” said Sam Khater, the chief economist at Freddie Mac.
“While many have already refinanced, the evidence suggests that upper-income homeowners have taken advantage of the opportunity more so than lower-income homeowners who could stand to benefit the most by lowering their monthly mortgage payment,” he said in a statement.
But it also provides a window of opportunity for homeowners looking for affordable rates.