money Millions overlook cheap mortgage rates as refinancing cools
Just days after a report said nearly 18 million U.S. homeowners have good reason to refinance, new data indicates many mortgage holders are missing out on opportunities to score major savings.
A trade group says refinance loan applications have gone down, despite mortgage rates that have continued to sink and make refinances look even more attractive.
Rates hit more new all-time lows just this week.
Mortgage refinancing slows even as rates keep falling
Overall mortgage applications slumped 5.1% in the week ending July 31, led by a 7% drop in demand for refinance loans, the Mortgage Bankers Association reported on Wednesday.
"Refinance activity decreased — despite the decline in (mortgage) rates — but the current pace remains more than 80% higher than a year ago, when rates were over 4%," says Joel Kan, the trade group's chief forecaster.
The mortgage bankers put the current average for 30-year fixed-rate mortgages at 3.14%, an all-time low in their weekly survey. Other reports indicate rates are even lower.
Mortgage giant Freddie Mac announced on Thursday that its widely followed survey shows 30-year rates have dropped this week to an average 2.88% — the lowest since the company started monitoring rates in 1971.
If you decide to go looking for a refi loan south of 3%, remember that mortgage rates can vary widely from one lender to the next. You have to shop around and get loan offers from multiple lenders to find the lowest rate available to you.
Comparison shopping is good practice when you're renewing your homeowners insurance, too. Gather fresh quotes each time, so you're certain you're getting the best deal.
Many homeowners let savings pass them by
Mortgage rates have been on a long, steady slide as part of the financial chaos unleashed by the coronavirus pandemic. As a result, borrowers can take advantage of huge savings.
Homebuyers — whose applications for "purchase" mortgages were down 2% last week — are finding that low rates are a good counterbalance for rising home prices, and help keep monthly payments down.
But while homeowners are slashing their mortgage costs with help from plunging rates, refinancing has been going through ups and downs. In early July, Kan speculated that many homeowners weren't taking out refi loans because they'd already done it.
Still, an estimated 17.8 million homeowners are sitting on higher-rate mortgages that are ripe for refinancing and could save them an average $287 a month, the mortgage data firm Black Knight reported this week.
That adds up to $5.1 billion in monthly mortgage savings now going unclaimed.
Black Knight says you're a good candidate for a refi if you have a 30-year loan with a rate that could be slashed by at least three-quarters of a point (0.75) — say from 3.70% down to 2.95%.
You also should have a credit score of 720 or higher, and at least 20% equity in your home, Black Knight says.
Mortgage rates are in a deep dive. So, if you haven't refinanced yet — or even if you already have — experts say it's time to weigh the costs of taking out a new loan against the likely savings, to decide whether a refi is right for you.
