Mortgage Applications Fall for Fifth Week in a Row as Rates Climb

Buyers are getting turned off by higher rates. Should you hold off on getting a mortgage?

There was a point in 2020 -- especially during the latter part of the year -- when mortgage lenders struggled to keep up with buyer demand. But over the past number of weeks, that demand has waned. In fact, last week, mortgage applications decreased for the fifth straight week in a row, reports the Mortgage Bankers Association. All told, applications were down 5.1%, and rising interest rates could largely be to blame.

Mortgage rates sat at or near historic lows for much of late 2020 into early 2021. But over the past two months, they've risen steadily. While rates are still competitive on a historical basis, they may no longer be low enough to offset the inflated home prices that can be found in much of the housing market. As such, it makes sense that we've seen application volume drop.

If you've been thinking of applying for a mortgage, you may be wondering if you, too, should hold off. Here are some things to consider when making that decision.

Why it pays to get a mortgage right now

Though today's mortgage rates aren't as low as they've been in recent months, they're still competitive. If you can afford a home in your target neighborhood, then you may want to apply for a mortgage now rather than wait. While there's a good chance rates will stay low for the rest of the year, without a crystal ball, we can't say that for sure. So you may want to submit that application before rates climb any higher.

To help you get ready, check out our step-by-step guide that explains how to buy a house.

Why it pays to wait on your mortgage application

On the other hand, if you're struggling to find a home in your price range, then applying for a mortgage now makes little sense. As just mentioned, mortgage rates will likely stay comparatively low for a while as the U.S. economy slowly but surely recovers from the impact of the pandemic. If you wait a few months for more inventory to hit the market, then you may be able to get a home at a much lower price point -- one that works better for your budget.

In the meantime, make sure you've researched and are familiar with the different mortgage types.

How to snag the best rate on a mortgage

Regardless of whether you decide to apply for a mortgage in the next few days or the next few months, there are steps you can take to land a more attractive rate:

• Boost your credit score. The higher that number, the lower a rate you're likely to get. You can raise your credit score by paying all of your bills on time and correcting errors on your credit report.
• Pay off some existing debt. Having a lower debt-to-income ratio makes you a more attractive loan candidate.
• Shop around. When you shop for a mortgage with different lenders, you will get different rates to compare, and ideally, you'll walk away with a great deal.

It's not surprising that rising mortgage rates are curbing buyer demand, but that doesn't mean now's a bad time to get a home loan. The most important thing is to assess your buying options right now. If there are homes you can swing financially that appeal to you, then it pays to move forward with a loan application. But if that's not the case, you shouldn't stress over the idea of putting your mortgage application plans on hold for a bit.