Weekly Mortgage Demand Falls 6% as Rates Climb

Two people standing in the front yard of a house and speaking with their realtor.

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Mortgage demand is down. Should you put your buying or refinancing plans on hold?

Although mortgage rates are still sitting at competitive levels, historically speaking, they have risen over the past few weeks. That's had an impact on mortgage loan originations.

Total mortgage application volume fell 6.3% last week compared to the week before, as per the Mortgage Bankers Association’s seasonally adjusted index. And much of that decline stemmed from a dip in refinance activity.

If you're thinking of buying a home or refinancing a mortgage, you may be wondering if now's not the best time to move forward with those plans. Here's what you need to know.

Is now a good time to take out a mortgage to buy a home?

If you attempt to buy a home right now, you'll face two related challenges -- limited inventory and high home prices. A lack of inventory could make it more difficult to find a home that checks all the right boxes for you. Further, low inventory has caused a surge in home prices, which means if you buy today, you could end up paying more for a home than you would have a year ago.

That said, from a mortgage rate perspective, it's still a good time to buy. As of this writing, the average rate for a 30-year fixed loan is 3.276%. Earlier in the year, the average 30-year loan rate was hovering closer to 3%. Historically speaking, a rate of 3.276% is still quite low, and so the fact that rates have creeped upward lately shouldn't necessarily deter you from buying. If anything, you should hold off on buying due to limited selection and ridiculously high home prices.

Is now a good time to refinance?

If you've been thinking of refinancing your mortgage, you may want to act soon. Refinance rates have been climbing, and while they're still quite competitive, we don't know if they'll continue to rise over the next few weeks or months.

Now, one thing you should know is the Mortgage Banks Association predicts that the average 30-year mortgage rate will reach 4% in 2022. Since refinance rates tend to be a bit higher than purchase mortgage rates, that would potentially put refinance rates at around 4.2% for a 30-year loan next year.

For context, though, even that rate is fairly attractive. But if you're going to swap your existing home loan for a new one, you might as well do so while rates are still closer to 3%. As of this writing, the average 30-year refinance rate is 3.325%.

Prepare for mortgage rate fluctuations

Mortgage rates may have risen recently, and mortgage application volume may have fallen, but things can change in the world of mortgages from week to week. If rates tick back downward, which could happen, we could see a surge in applications, especially as buyers and homeowners seek to finalize their plans before 2021 comes to a close.

Of course, mortgage activity doesn't have to influence your plans. Ultimately, you'll need to assess your own options to see if it makes sense to buy a home or refinance soon.

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