It’s A Refinance Surge

Despite a low inventory real estate market and rising rates, the demand for loans and refinancing remains strong.

This is surprising for a number of reasons. First, the housing market is facing a number of challenges, including low inventory and rising interest rates. Second, the Federal Reserve is raising interest rates in an effort to combat inflation. This is making it more expensive to borrow money, which many thought would lead to a decline in demand for loans. But that’s not what’s happening right now...

However, there are a few factors that are helping to keep the demand for loans and refinancing strong. Albeit more slowly, the population is still growing, and unemployment rates are relatively low.

Even though rates have been rising, they are still lower than they were in the past. This is making it attractive for homeowners to refinance their mortgages and save money on their monthly payments.

More importantly, many homeowners are sitting on a lot of equity in their homes. This is due to a number of factors, including the strong housing market and rising home prices. Homeowners can use this equity to refinance their mortgages or to purchase a new home.

While mortgage rates rose again, refi applications jumped, as did purchase applications

Last week, according to CNBC, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.31% from 7.27%, according to the Mortgage Bankers Association (MBA). This marks the sixth consecutive week of increases in mortgage rates.

At the same time, applications to refinance a home loan jumped 13% last week compared with the previous week, according to the MBA. This is the highest level of refinance activity since May.

Applications for a mortgage to purchase a home increased 2% for the week and were 26% lower than the same week one year ago.

What do these trends mean for homebuyers and homeowners?

Most would believe that the increase in mortgage rates is likely to dampen demand for home purchases, especially among first-time homebuyers. It should also make it more expensive for homeowners to refinance their mortgages.

But that’s not what’s happening in the real world. The increase in refinance applications suggests that some homeowners are still looking to take advantage of lower interest rates or to consolidate debts.

Whatever the reason, the slight increase in purchase applications is a positive sign, but it is important to note that purchase activity is still significantly lower than it was a year ago. This is most likely due to a combination of factors, more specifically a very limited housing supply.

Here is a more detailed look at each of the trends:

Rising mortgage rates

Mortgage rates have been rising steadily since the beginning of the year. This is due to a number of factors, including the Federal Reserve’s efforts to combat inflation. The Fed has been raising interest rates in an effort to slow down economic growth and bring inflation under control.

Rising mortgage rates are likely to have a negative impact on the housing market. They will make it more expensive for home buyers to purchase a home and could lead to a decline in demand. Rising rates could also lead to an increase in foreclosures, as homeowners may struggle to make their monthly mortgage payments.

Increase in refinance applications

The increase in refinance applications is a positive sign for homeowners who are looking to lower their monthly mortgage payments. However, it is important to note that refinance rates are still higher than they were earlier in the pandemic.

There are a few reasons why homeowners may be refinancing their mortgages now. Some homeowners may be looking to take advantage of lower interest rates than they currently have. Other homeowners may be refinancing to shorten the term of their loan or to cash out some of the equity in their homes.

So, what should you do?

Homebuyers:

• Get pre-approved for a mortgage before you start shopping for a home. This will give you an idea of how much money you can borrow and what your monthly payments will be.
• Be prepared to act quickly. The housing market is competitive, so it is important to be ready to make an offer on a home when you find one that you like.
• Don’t be afraid to negotiate. The seller may be willing to negotiate on the price of the home, especially if you are willing to make a quick offer.

Homeowners:

• Consider refinancing your mortgage if you have a high interest rate. You may be able to lower your monthly payments and save money over the life of your loan.
• Make sure to have a budget and stick to it. This will help you to avoid overspending and getting into debt.
• Consider saving money for a down payment on a new home or for home improvements.

Contact Embrace Home Loans® to Review Your Refinancing Options

Embrace Home Loans is a leading provider of mortgage loans and refinancing services. We offer a wide variety of loan products, including conventional and non-conventional loans, and we work with borrowers of all credit scores and financial situations.

We are fully committed to providing our customers with a personalized and streamlined loan experience and guide you every step of the way.

To learn more about how Embrace Home Loans can help you refinance your mortgage, contact us today. We look forward to helping you achieve your financial goals.