Mortgage Rates Hit New All-Time Low, But Rushing To Refinance Might Not Be Necessary
by Aly J. Yale
It was another record-breaking week for mortgage rates. According to the latest data from Freddie Mac, rates on 30-year loans bottomed out again, hitting a new all-time low of just 3.15%.
That’s down from 3.25% last week and 3.99% a year ago. It’s the third time this year that rates have hit record lows.
The low rates have sent mortgage applications up — despite the economic uncertainty that COVID-19 has spurred. In fact, overall mortgage applications increased 2.7% this week, while purchase loan applications were up 9%. It was the sixth week in a row that purchase activity jumped.
"The housing market is continuing its path to recovery as various states reopen, leading to more buyers resuming their home search,” says Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association. “Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.”
In April, purchase demand had dropped 35% over the year. Sam Khater, Freddie Mac’s chief economist, calls it “a remarkable turnaround given the sharp contraction in economic activity.”
Refinancing, though, is another story.
Though refinance activity is still strong (up 176% over the year), applications on refinances have actually been declining in recent weeks. Rising unemployment is the likely culprit here, as mortgage lenders need to verify employment and income as part of any refinance application.
“There remain millions of homeowners who could save money by refinancing, as long as they still have income and credit scores that allow them to qualify,” says Nerd Wallet’s homebuying and mortgage expert Holden Lewis. “With the skyrocketing unemployment rate, however, many would-be refinancers are stuck with their current mortgages.”
Fortunately, for homeowners currently unable to refinance and take advantage of the market’s low rates, the clock hasn’t run out just yet. According to Lewis, if things keep on their current trajectory, you might actually have a few months to pull the trigger.
“With mortgage rates so low, June is a good time to refinance,” Lewis says. “There's no need to rush, though: interest rates might remain near record lows for months.”