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Mortgage rush continues as rates fall to new record lows - here’s how to secure your new mortgage deal

Mortgage rush continues as rates fall to new record lows - here’s how to secure your new mortgage deal
(Image credit: Getty)

Ever greater numbers of Americans are continuing to pursue their home buying dreams spurred on by mortgage rates that fell back to record lows last week. According to the latest Mortgage Bankers Association (MBA) data, the volume of mortgage applications for the week ending October 2 increased by 4.6% from a week earlier, and was also up 21% on the same week in 2019. 

At the same time, the number of homeowners approaching the best refinance mortgage companies for a new mortgage deal was up 8% from the previous week and a remarkable 50% higher than the same week one year ago. As a result, refinance volumes hit their highest mark since mid-August. 

"Mortgage rates declined across the board last week - with most falling to record lows - and borrowers responded,” said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. 

How far did mortgage rates drop?

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less decreased to 3.01% from 3.05%, the MBA revealed, while points decreased to 0.37 from 0.52 for mortgage loans with a 20% down payment. Similarly, the 30-year rate for jumbo loan balances (above $510,400) slipped to 3.31% from 3.33%, with points decreasing to 0.3 from 0.39, and for FHA backed loans dropped to 3.12% from 3.15%, as points fell to 0.32 from 0.43. 

Mortgage rush continues as rates fall to new record lows - here’s how to secure your new mortgage deal

(Image credit: Getty Images)

Perhaps helping to explain the additional surge in refinance applications, even larger decreases were seen among 15-year fixed rates, which fell to 2.59% from 2.65%, as points dropped to 0.36 from 0.49. 

Will the mortgage rush continue? 

This week’s announcement by President Trump that stimulus discussions are now on hold until after the election saw stocks head lower and bond markets improve, a scenario that usually results in interest rates moving lower. But while the incentive provided by low cost mortgage deals looks set to persist, the application numbers are starting to point towards a slowdown in home buyer activity. 

In particular, challenges appear to be growing for those looking to take their first step onto the property ladder. This is evidenced by a rise in the average loan size to a new record of $371,500, a trend that is resulting from stronger activity in the higher end of the housing market, where larger loan sizes are involved. 

"There are signs that demand is waning at the entry-level portion of the market because of supply and affordability hurdles, as well as the adverse economic impact the pandemic is having on hourly workers and low-and moderate-income households,” said Joel Kan. “As a result, the lower price tiers are seeing slower growth, which is contributing to the rising trend in average loan balances."

Is now a good time to get a mortgage?

If you’re trying to figure out whether a new mortgage is a good idea - either because you’re hoping to buy a new home or simply want to refinance your mortgage - then now is a great time to approach the best mortgage lenders.     

Mortgage rush continues as rates fall to new record lows - here’s how to secure your new mortgage deal

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When it comes to refinancing, the savings that you could make on your monthly payments are potentially huge, with record numbers of American homeowners switching to a cheaper mortgage deal this year already. Meanwhile, home sales have been reaching numbers not seen since the mid-00s too, with people increasingly taking stock of their housing priorities amid the backdrop of COVID-19, and making the most of the cheap cost of home loan finance to make their move happen. 

The suggestion that rates might fall even further may see some people sit tight a little longer and chance their arm at securing an even better mortgage deal. However, with the rates on offer being so good as they are, it doesn’t make sense to wait any longer and risk them actually going the other way. 

It’s also worth considering that the availability of mortgage credit is actually on the decline, and looks set to contract further. According to the MBA, the mortgage credit supply is now at its lowest level since February 2014, as lenders react to events in the broader economy and tighten their belts accordingly. 

“Across all loan types, there continues to be fewer low credit score and high-LTV loan programs,” notes Joel Kan. “The housing market overall is on strong footing, but the data show that lenders are being cautious, given the spike in mortgage delinquency rates in the second quarter, as well as the ongoing economic uncertainty."

Mortgage rush continues as rates fall to new record lows - here’s how to secure your new mortgage deal

(Image credit: Getty)

How to find the best mortgage

The challenge for those wanting a mortgage is therefore to make yourself look as appealing to a mortgage lender as you possibly can. So this means tracking down the paperwork attached to your current mortgage if you already own a home, and for everyone, making sure you have ready all the evidence of income, savings, employment, debt and so on that a mortgage company normally wants to see. 

Given there are fewer loans on offer to those with lower credit scores, checking your credit rating, and perhaps arranging for the type of boost available from the best credit repair services, is well advised too. 

Crucially, you’ll also want to secure the very best mortgage deal that you possibly can. This means checking out the various mortgages and rates that different lenders have on offer. It may sound as if a lot of effort will be required, but using a comparison site such as LendingTree can immeasurably lighten this load. All you have to do is enter your personal details and borrowing requirements once, and the leading mortgage companies will get in touch with the rates and terms that they are willing to offer you.