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Mortgage rates hit another new low last week, falling to the lowest level on record in nearly 50 years. With rates falling to unprecedented low levels, current homeowners and potential homebuyers have jumped on the chance to apply for an affordable home loan.
In fact, even as the COVID-19 pandemic rages, there's been a dramatic increase in the number of people borrowing to buy a home or refinancing to change the terms of their existing loan.
Low rates drive a surge in interest in mortgage loans
Record-low mortgage rates led to a borrowing frenzy last week. The Mortgage Bankers Association reported a 3.9% increase in the volume of new mortgage applications compared with the week before (on a seasonally adjusted basis).
This may not sound like a dramatic jump, but the data shows the number of new applications for a home purchase last week was up 19% on the year before. The growing demand for new mortgages is especially impressive given it's currently difficult to find an affordable home to purchase. Home prices have been rising rapidly nationwide.
Refinance applications have increased even more than applications for new loans. The number of refinance applications jumped 5% last week compared to the week prior. The volume of refinance applications is a shocking 79% higher than it was a year ago.
Existing homeowners aren't hampered by the need to find a new home to buy before they can apply. This is why refinance requests have gone up much more than new mortgage loan applications. In fact, refinances accounted for 71.1% of all new mortgage loan applications last week, up from 69.8% the week prior.
This data shows demand for home loans won't wane any time soon, even as we move out of the traditional home-buying season. It's also both good news and bad news for those looking to purchase a home. As long as mortgage rates stay near current lows, or hit new ones, the strong demand for homes that's driven up prices will likely continue for the foreseeable future.
Is now the right time for you to refinance or to borrow to buy a home?
With a growing number of Americans applying for home loans, you may be wondering if it's time for you to take action and secure a mortgage.
If you currently have an existing home loan, it's definitely worth shopping around for a mortgage refinance. There's a very good chance you could save compared with your current loan, perhaps substantially. If you can -- and you'll be staying put long enough for the savings to cover the up-front costs of refinancing -- there's little reason not to act.
Those looking for a home face a more difficult question. High home prices could offset some of the savings resulting from today's record-low loan rates. Still, the opportunity to secure a 30-year fixed-rate loan for well under 3% was unimaginable last year. If you can find a home at a price that's reasonable and you're financially ready to purchase a home, it makes sense to take advantage of today's low rates.
If you're waiting for rates to drop even further, there's no one clear answer on whether that will happen. The bottom line is, rates have repeatedly hit new lows in recent weeks but there's no guarantee that will continue.
You may not want to pass up the chance to lock in a rate that's the lowest it's been in more than a half-century of tracking. Shop around with several mortgage lenders to see the rates and terms you can personally qualify for, and then make your choice.