Low mortgage rates offer great opportunities to refinance
As politicians engaged each other in ideological and legislative combat last week, mortgage rates fell to new lows.
The most popular rate, the 30-year fixed mortgage, fell from 4.57% to 4.45% last week , to its lowest point since last November, according to the Mortgage Bankers Association (MBA).
The average contract interest rate for 15-year fixed-rate mortgages also fell to 3.52% from 3.67%, with points decreasing to 1.02 from 1.08 (including the origination fee) for 80% LTV loans.
The effective rate also decreased from last week. Both the contract rate and the effective rate for 15-year fixed rate mortgages are the lowest since the survey began in 1990.
The super-low interest rates drove up total mortgage applications for mortgages and refinancing by about 7%, compared with a week earlier, said Michael Fratantoni, the MBA’s VP of Research and Economics.
According to the MBA;
The Market Composite Index, a measure of mortgage loan application volume, increased 7.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 7.0 percent compared with the previous week. The Refinance Index increased 7.8 percent from the previous week. The seasonally adjusted Purchase Index increased 5.1 percent from one week earlier. The unadjusted Purchase Index increased 5.2 percent compared with the previous week and was 5.9 percent higher than the same week one year ago.
This now represents an excellent time for homebuyers and homeowners to purchase and refinance loans. The up-front points lenders charged dropped to 0.78 from 1.14 for 20%-down loans, according to the MBA. A homebuyer financing a $200,000 mortgage could save $14 a month and pay $720 less at closing based on the current points.
Even with record low rates, the refinance index is almost 30% below last year’s level. Negative equity and a weak job market continue to constrain borrowers. Purchase activity thus remains remains weak by historical standards.
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