Mortgage refinances slow as homeowners close their eyes to low rates

Lots of U.S. homeowners have apparently missed the memo that mortgage rates have dropped to their lowest levels in months. Overall mortgage applications have dipped, and refinances — which soared in mid-April — have flatlined, a new report shows.

That’s despite recent data showing that millions of mortgage holders still have opportunities to save hundreds each month by refinancing.

Mortgage applications dip, despite sunken rates

The full range of mortgage applications slipped 0.9% last week, led by a decline in the "purchase loan" requests submitted by homebuyers, the Mortgage Bankers Association reported on Wednesday.

Demand for those mortgages fell 3% for the week ending April 30. "This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity," says Joel Kan, the MBA’s chief forecaster.

Purchase applications last week were up 24% from a year earlier, when the housing market was quiet as most Americans were under stay-home orders due to the pandemic.

Meanwhile, applications for refinance mortgages were essentially flat last week — up a miniscule 0.1%, and 17% lower than last year at the same time.

Mortgage rates also have seen little change, with the average rate on the popular 30-year fixed-rate mortgage edging up to 3.18% last week from 3.17% a week earlier, the MBA’s survey shows. In late March, the rates were much higher: typically 3.48%.

Been holding out on a refi? Consider these facts

While many homeowners have already refinanced their loans over the past year, millions appear to be holding out — despite the sharp drop in mortgage rates.

As many as 13 million Americans who haven’t refinanced yet can still benefit substantially by grabbing hold of one of today’s historically low rates, according to technology and data provider Black Knight.

Those homeowners could save an average $283 a month, according to the company’s calculations, which are based on individuals or families with 30-year mortgages and at least 20% equity built up in their homes.

Good refi candidates also have above-average credit scores of at least 720. If you haven’t seen your score in a while — or ever — it’s easy to check your credit score online for free.

Black Knight says a refi is worthwhile if you can shave at least three-quarters of a percentage point (0.75) off your current mortgage rate.

Refinancing into a mortgage with a shorter mortgage term can shrink your lifetime interest costs dramatically. The average rate on a 15-year fixed-rate mortgage, a popular loan for refinances, fell to 2.54% last week from 2.55% the previous week.

How to get the best mortgage rate

Low mortgage rates may not last much longer as the economy comes roaring back in many parts of the country and more Americans are vaccinated.

If you’re considering a refi now, be sure to check mortgage rates from at least five lenders. Studies have shown comparison shopping will bank you the most savings.

If a refinance wouldn't work for you, use your comparison shopping skills to save in other ways. Try lowering your homeowners insurance when your policy comes up for renewal. Get rate quotes from multiple insurers to cover all your bases and get the best price.