Demand for mortgage refinances in the US is falling

mortgage refinances

Overall mortgage applications declined 4% in the week ending Dec. 10, led by a 6.4% dive in refinance activity, the MBA reported on Wednesday

Though mortgage rates remain historically low at far below the levels from the months just before the pandemic, demand for mortgage refinances in the US is falling.

Refinancing applications have dropped and are down sharply from a year ago, according to a new survey from the country’s largest mortgage trade association.

Recent increases in rates may have spooked homeowners. But with the Federal Reserve fixing to raise interest rates multiple times in 2022, the lenders warn that mortgage borrowers may not have much more time to snag a cheap refinance rate.

Overall mortgage applications declined 4% in the week ending Dec. 10, led by a 6.4% dive in refinance activity, the Mortgage Bankers Association (MBA) reported on Wednesday. Compared to the same time last year, refinancing demand was down by a stunning 41%.

Fewer homeowners have a strong incentive to refinance at current rates, says Joel Kan, the MBA’s forecasting chief.

The trade group’s weekly survey has the average for a 30-year fixed-rate mortgage holding for a second week at 3.30%, up from 2.97% in early August.

Even so, the rates on home loans remain much cheaper than they were before the pandemic broke. At Christmas 2019, the 30-year average was 3.99%.

The MBA predicts 30-year mortgage rates will hit an average 4% by the end of 2022.

If rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller, Kan said last week.

It’s likely millions of potential refinancers still haven’t made their move. A recent Zillow study found 78% of homeowners never traded in their loans to score one of the ultra-low rates available during the pandemic’s first year. Among those who did refinance, almost half saved $300 or more a month.

Mortgage rates hit all-time lows during the COVID surge last winter. Now, the delta variant is filling hospitals again while the omicron threat emerges. But with most Americans vaccinated and many getting booster shots, no one is expecting the kind of economic disruption that would send mortgage rates tumbling back.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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