As mortgage interest rates have edged up, the flood of homeowners seeking to save money by refinancing their loans is beginning to ebb—a little.
The number of refinance applications fell 10.4% week over week for the seven days ending March 13 as rates ticked up, according to the Mortgage Bankers Association. The trade group releases weekly surveys of more than 75% of U.S. residential mortgage bankers. However, applications were still up 100% over a month ago and 401.5% more than the same week a year ago.
The volume of all mortgage applications, which include purchase loans, dropped 8.4% on a seasonally adjusted basis, according to the association.
Lenders had been inundated with homeowners seeking refinances when rates reached new lows at the beginning of the month. Rates bottomed out at 3.13% on March 2, according to Mortgage News Daily. Homeowners rushed to capitalize on the potential savings, which could be as high as hundreds of dollars a month and tens of thousands of dollars over the life of a 30-year loan, in some cases.
“Amidst these challenging times, the savings that households can gain from refinancing will help bolster their own financial circumstances and support the broader economy,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.
The percentage of refinances among all mortgages dipped from 76.5% in the previous week to 74.5% as of March 13, according to MBA.
The influx of business, more than many lenders could handle, caused them to raise rates to stem the flow of refinance applications. Rates hit 4% for 30-year fixed-rate loans on Friday, according to Mortgage News Daily. But that’s likely a temporary rise.
“A return to recent lows is highly likely,” says Matt Graham, chief of operations at MortgageNewsDaily.com. “Volatility is also a given, more volatility than we’ve ever seen when it comes to variations from day to day and lender to lender.”
After the Federal Reserve slashed short-term interest rates over the weekend, mortgage rates began falling again. Mortgage rates are influenced by short-term interest rates, although the two are not directly related. The rate on an average 30-year mortgage tumbled to 3.45% on Tuesday but went back up to 4.13% on Wednesday. However, experts believe it’s likely to keep coming down.
“The Federal Reserve’s rate cut and other monetary policy measures to help the economy should help to bring down mortgage rates in the coming weeks, spurring more refinancing,” MBA’s Kan said.
If a new deluge of refinance applications is on the way, homeowners hoping to join in should get all their paperwork ready to go. And they should anticipate delays in what could be a lengthier process.
“Will rates be back? Yes,” says Graham. “Will anyone in the industry be around to take your application, do the appraisal, sign the documents, record with the county? Great question!”
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