The great refinancing binge of 2021 was a good time for homeowners while it lasted, but the craze is now petering out in the face of rising mortgage rates.
With vaccines rolling out and the economy looking up, the cost of borrowing money has increased, and homeowners are finding fewer reasons to refinance. Applications for refis dropped 5.1% the week ending March 19, according to the Mortgage Bankers Association, the same week that the rate on an average 30-year fixed-rate mortgage rose to 3.36% from 3.28%, its highest since June.
The year started off with a refinancing mania that was spurred on by ultra-low mortgage rates averaging 2.86%, nearly the record low. But since then, the average rate has risen 0.5 percentage point, and refinancing applications have fallen 15%, reaching their lowest point since September.
“Mortgage rates have moved higher in tandem with Treasury yields, as the outlook for the U.S. economy continues to improve amidst the faster vaccine rollout and states easing pandemic-related restrictions,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press release.
The effect of those rising rates on home purchases is less clear. While applications for mortgage purchases—a leading indicator of home sales—rose for the fourth consecutive week, the rising rates combined with increasing prices threaten to put homes out of reach for growing numbers of buyers, Kan said.