Demand for mortgage refinances surges as rates drop: Here’s how to get yours

As mortgage rates drop, the demand for refinances is surging. Total mortgage refinance applications increased 20% over the previous week, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA).

Mortgage rates dropped for the third consecutive week last week to 2.88% for a 30-year fixed-rate mortgage, according to the latest survey from Freddie Mac. These low rates have relieved some tensions in the homebuying market; as competition heats up, prospective buyers have been forced into bidding wars and are offering well above asking price. But, this has been the most beneficial to homeowners seeking to refinance their mortgage. 

In today’s low-rate environment, refinancing can bring some homeowners savings of hundreds of dollars on their monthly payment and thousands over the life of the loan. Visit Credible to see your personalized rates and find out how much you could save on your monthly payments with a new mortgage.

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What's the reason behind the rise in mortgage refinances?  

Mortgage applications overall increased last week, and it was led by a sudden surge in mortgage refinance applications, the MBA survey showed. The Market Composite index, a measure of mortgage loan application volume, increased 16% for the week ending July 9, 2021.

"Overall applications climbed last week, driven heavily by increased refinancing as rates dipped again," said Joel Kan, MBA associate vice president of economic and industry forecasting. "Treasury yields have trended lower over the past month as investors remained concerned about the COVID-19 variant and slowing economic growth. 

"Refinance applications increased over 20% last week after adjusting for the July 4th holiday, aided by a 23% increase in conventional refinance applications," Kan said. "Also, there may have been a delayed spillover of applications from the previous week, when rates also decreased, but there was not much of response in terms of refinance applications."

Check out Credible to see if you could benefit from refinancing your mortgage into a lower interest rate. You can compare multiple mortgage lenders including rates and fees and see which one is best for you. 

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Mortgage rates drop to near-historic lows

In today’s low-rate environment, it may be surprising to hear that mortgage interest rates once hovered near 20%. Back in 1981, the Federal Reserve fought inflation by raising interest rates, sending the 30-year rate soaring to an all-time high of 18.63%.

Since then, interest rates have decreased significantly, hovering between 4% and 6% as the economy recovered from the housing crash of 2008. But last year, as rates began to plummet, the 30-year mortgage rate dipped below the 3% mark several times. Now, interest rates have dropped for the third consecutive week to 2.88%.

If you want to find your personal interest rate on a new loan, visit Credible to compare rates from multiple lenders at once and get prequalified in minutes without affecting your credit score. 

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How much do lower interest rates affect your monthly payment?

With interest rates at all-time lows and homeowners increasingly looking to refinance their home loan, it’s important to know if doing so would benefit you. In May, 12.2 million homeowners would have benefitted financially from refinancing their mortgage, the latest report from Black Knight shows. 

In terms of monthly payments, using today’s median home price of $287,148 and a 30-year fixed rate mortgage term, borrowers would pay $4,475 per month if mortgage interest rates were still at the all-time high from the 1980s. Bringing it down to a 4% interest rate for the same loan term, that puts the monthly payment at $1,371.

By refinance a mortgage from a 4% interest rate loan into today’s 2.88%, homeowners would save $179 per month, lowering their monthly payment to $1,192. To calculate how much you can save, use a refinance calculator and enter your loan amount along with today’s interest rates. If you want to get started on getting a lower rate through a mortgage refinance, contact Credible to speak to a home loan expert and get your questions answered about closing costs, your current mortgage or other refinance options available to you.

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