Flight to safety: owners refinance into fixed-rate loans
Flight to safety: owners refinance into fixed-rate loans
Tumbling interest rates are pushing homeowners to call their lenders. But potential buyers are still sitting on their hands.
With typical mortgage rates hovering around 6.5 percent, the lowest they have been in a while, refinance applications increased by 35 percent from the previous week and were up 118 percent from a year ago, according to a report by the Mortgage Bankers Association.
Applications for mortgages to purchase homes, however, were up just 3 percent from the week before on a seasonally adjusted basis — and were down 8 percent year-over-year. Potential buyers may be waiting for mortgage rates to fall further, for more inventory to hit the market and for home prices to come down from record highs.
Refinance requests accounted for 49 percent of total mortgage applications, up from 42 percent the previous week. Adjustable-rate mortgage requests increased to 7.3 percent of applications.
The average rate last week for conventional, 30-year mortgages was essentially unchanged at 6.54 percent, and also for 30-year jumbo loans (more than $766,550) at 6.78 percent.
The average rate on 15-year, fixed-rate mortgages decreased for the second consecutive week, to 5.96 percent from 6.03 percent. Rates are lower for 15-year mortgages because they offer less risk for government-sponsored entities and investors who buy those loans.
Updated: Boston Real Estate Blog 2024
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Updated: Boston Real Estate Blog 2024
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From January to March, 89 percent of homeowners who refinanced their one-year ARMs, or loans on which rates remain constant for the first 12 months, switched to fixed-rate mortgages, according to data released by Freddie Mac, in May.
During the same time period, 84% of those holding 5-7 year adjustable-rate mortgage loans switched to fixed-rate mortgage loans, according to the government.
That’s what everyone should do, right?
Get out of risky loans, into safer, steadier loans.
If they can.
If your home is worth less now than when you bought it, or what you owe on it, there’s little to no chance you’ll find a bank willing to loan you the money.
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