Mortgage Refinance Applications Hit Highs
It has been a great year for homeowners. Many did not think that 2020 would be great for the real estate market. The crushing pandemic and its economic impacts caused many to predict that we would see a repeat of the 2008 housing crisis. However, the market saw historically low mortgage rates, which have carried into 2021. The rock bottom mortgage rates led to a throng of people turning from potential homebuyers to actual homeowners. Home sales surged, while the inventory of available houses remained low. This has led home prices to soar through the roof. It does not seem like inventory will increase much this year, which is causing many to think that home prices will continue to increase. Low mortgage rates made 2020 great for homeowners in another respect. It presented the opportunity to refinance their mortgages. Where does the refinance market stand in the beginning of 2021?
Mortgage Refinance by the Numbers
Where do mortgage refinance applications stand at this point in 2021? In the first week of January mortgage refinance applications increased over 16% from the previous week. This is the largest number of refinance applications since March of the previous year. A lot of this might appear to be seasonal at first glance. Last year, during the first week of January of 2020, refinance applications increased 30% from the previous week. However, last year’s large increase came on the heels of a large drop in the mortgage rates. This year’s boom in applications was not in the wake of slashed mortgage rates. So, why did we see a bunch of people trying to refinance their homes in the first week of January?
Why are More Homeowners Applying to Refinance their Mortgage?
The biggest reason why mortgage refinance applications increased is that homeowners are afraid of missing out. Mortgage rates have been at historic lows, but they will not always be that way. Mortgage rates have already started to climb since the calendar turned to 2021. Once mortgage rates start to rise, it is very unlikely that they will drop to previous lows. Homeowners that did not take advantage of refinancing their existing loans want to take advantage of the situation while they can.
There is good reason to believe that mortgage rates will continue to creep up as the year moves along. The historic lows have everything to do with the federal government’s response to the coronavirus pandemic. In an effort to stimulate the economy and stave off an even worse recession that we have experienced, interest rates were slashed. While the coronavirus pandemic is worse than it has ever been, there is light at the end of the tunnel. The United States is ramping up distribution of two different vaccines that have proven highly effective. There are also other vaccinations that might be approved in the near future, as well. These vaccines are great news for the economy.
As more and more people get vaccinated, more and more industries can return to work. People will be able to go about their lives, and will be able to spend money like they did pre-pandemic. Plus, people who have lost their jobs because their industries have been shut down will be able to return to work. All of this is why many feel that the economy will face a near complete recovery by the end of 2021. If that is the case, then there will be no need for the government to keep interest rates at rock bottom levels. This is leaving homeowners who have been waiting to refinance out of hope that mortgage rates fell even more now rushing to refinance their mortgage.
Final Thoughts
There are tremendous advantages to refinancing your home loan while mortgage rates are still low. Getting a lower rate on your loan can save you lots of money over the life of your loan. Additionally, refinancing your loan while there has been a large increase in home values is very beneficial to homeowners. When you refinance your loan at a lower rate, you decrease the total cost of your loan. Lower loan totals combined with higher home values means that you get an instant boost in the amount of equity you have. This is a huge benefit to homeowners. Remember, equity is an asset. There are a number of things that homeowners can do with increased equity. Equity can be used to renovate homes, used as lines of credit, or it can provide homeowners an incentive to sell their homes.
Either way, if you are able to qualify for a mortgage refinance, there is no reason why you should not take advantage of getting a lower rate. So, if you have been considering it, you should not wait any longer and apply now. If you are interested in taking advantage of mortgage rates while they are still low, contact us! We can give you a complimentary refinance qualifier and give you a full rundown of all the options you have available. Sometimes, there is wisdom in large crowds. When it comes to all of the people who applied to refinance their home loans in the first week of January, that certainly holds true.
