Thirty-year fixed rates held steady, and 15-year fixed loans and 5/1 ARM rates dropped a bit Wednesday, according to a NerdWallet survey of mortgage rates published by national lenders this morning.
Mortgage applications rise on heels of rate surges
The sharp rise in mortgage rates since the Nov. 8 presidential election is spurring more borrowers to apply for purchase and refinance loans, presumably before rates rise even more.
In fact, overall mortgage applications increased 2.5% for the week ending Dec. 16 from one week earlier, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. Purchase loan applications dipped by an infinitesimal 0.1% compared with the previous week and were 1% higher than the same week one year ago. Meanwhile, the refinance share of mortgage activity increased to 57.9% of all applications from 57.2% the previous week, the survey found.
Another notable trend: The adjustable-rate mortgage portion of activity jumped to 6.5% of total applications, its highest level since February 2016.
Since Donald Trump won the election, mortgage rates have soared. That’s one of the main reasons more homeowners might be taking advantage of refinancing and why borrowers are turning more toward lower-rate ARMs, says Chris Downey, president of Harbor Mortgage Solutions in Braintree, Massachusetts.
“I’m not surprised to see the spike in applications this time of year,” Downey tells NerdWallet. “People are getting over their inertia and realizing they waited too long; now mortgage rates have spiked considerably. If you’ve been waiting to refinance — and it’s about as much fun as going to the dentist — now you’re rushing to get it done.”
With ARMs, which carry a fixed initial rate for five, seven, 10 or even 15 years that can then reset higher or lower after the period expires, it comes down to cost. Right now, the spread between a long-term, fixed-rate loan and a shorter-term ARM is as much as three-quarters of a point. And that can amount to paying thousands of dollars more in interest for your mortgage over time, Downey says.
“Several of our clients are applying for ARMs; it’s a risk, but it’s a calculated risk to get a lower rate,” Downey says. “If you only plan to stay in a home for five or 10 years, it becomes a more attractive option to go with a 5/1 or 10/1 ARM than a 30-year fixed loan.”
Homeowners looking to lower their mortgage rate can shop for refinance lenders here.
NerdWallet daily mortgage rates are an average of the published APR with the lowest points for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.