Feasting on Low Rates, Homeowners Refinance in Droves

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The year started off with a bang for homeowners seeking lower interest rates on their mortgages, with a measure of refinancing activity shooting up 20% in one week, even after adjustment for the holidays. 

For the week through Jan. 8, the Mortgage Bankers Association (MBA)’s refinancing index surged 20%, the most for any week since March—when already good mortgage rates plummeted even further at the outset of the COVID-19 pandemic. The index is now at its highest point since March, too.

Amazingly affordable mortgage rates are helping to drive a boom in mortgage refinancing as well as homebuying amid the pandemic. Freddie Mac saw the average 30-year fixed-rate drop to 2.65% from 2.67% at the start of the year, the latest in a series of record lows.

“This drop in mortgage rates opened up refinance opportunities to more borrowers, many of whom already held mortgages with low interest rates,” said Molly Boesel, principal and economist with real estate data firm CoreLogic, in an email.

Looking at its own data showing 30-year fixed rates inching up to 2.88% from 2.86%, the MBA had an alternative explanation for the sudden jump in refinancing.

“The thinking is that people may have been waiting to see if rates went lower, and last week’s climb made them act sooner,” Adam DeSanctis, director of public affairs for the MBA, said in an email. “I think the next few weeks will be telling if the trend will pick up or abate.”

The Purchase Index, a measure of mortgage applications for home purchases, rose 8% from the week before, reaching the highest level since November.