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Refinance applications spike 20% as homeowners rush to get low rates

January 13, 2021. Summarized by summa-bot.

Compression ratio: 57.4%. 1 min read.

A home for sale is seen Tuesday, Dec. 8, 2020, in Orlando, Fla. U.S. long-term mortgage rates declined this week to new record lows for the first week of 2021. The year opens against the continuing backdrop of damage from the coronavirus pandemic on the U.S. and global economies, which suppressed home loan rates through most of 2020. (AP Photo/John Raoux)

In the past 12 months, mortgage rates fell to new record lows more than 15 times. But with an expectation that rates may soon begin ticking up, homeowners are racing to refinance.

That's 93% higher than a year ago and the highest rate since March.

"Booming refinance activity in the first full week of 2021 caused mortgage applications to surge to their highest level since March 2020, despite most mortgage rates in the survey rising last week," said Joel Kan, MBA's associate vice president of economic and industry forecasting.

In MBA's survey of interest rates last week, the 30-year fixed mortgage rate climbed two basis points to 2. 88%.

But the 15-year fixed rate ticked down to 2. 39% -- a record low.

The share of mortgage activity that were refinances increased to 74. 8% of total applications from 73. 5% the previous week.

With rates so low, the share of people who could benefit from refinancing is among the largest ever, according to Black Knight, a mortgage data company.

Some 19. 4 million homeowners are in a position to save an average of $309 per month by refinancing, according to a report by Black Knight in November when the average rate for a 30-year-fixed rate mortgage was at 2. 72%.

Purchase applications are up, too, increasing 60% from the previous week, and they are 10% higher than a year ago.

A combination of economic, political and pandemic-related factors suggest mortgage rates will slowly move higher this year.

Kan said the expectation of additional fiscal stimulus from the incoming administration and the rollout of vaccines drove Treasury yields and rates higher last week.

Mortgage rates typically follow the movement of long-term bonds, like the 10-year Treasury.

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