No siesta for mortgage refinance fiesta

Mortgage rates edged up this week, but they remain near the bottom as an increasing number of homeowners seek to refinance their mortgages to take advantage of the situation.

30 year fixed rate mortgage -- 3 month trend
  • The benchmark 30-year fixed-rate mortgage rose to 3.81 percent from 3.8 percent last week, according to the national survey of large lenders. One year ago, that rate was 4.56 percent. Four weeks ago, it was 3.96 percent. The mortgages in this week's survey had an average total of 0.25 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.26 percent. This week's rate is 0.45 percentage points lower than that 52-week average. Excluding last week, the last time the 30-year fixed was lower was the week of May 22, 2013, when it was 3.74 percent.
  • The benchmark 15-year fixed-rate mortgage rose to 3.18 percent from 3.11 percent.
  • The benchmark 5/1 adjustable-rate mortgage rose to 3.19 percent from 3.09 percent.
  • The benchmark 30-year fixed-rate jumbo rose to 4.01 percent from 3.95 percent.

Weekly national mortgage survey

Results of's Jan. 21, 2015, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:3.813.183.19
Change from last week:+0.01+0.07+0.1
Monthly payment:$769.77$1,153.80$712.67
Change from last week:+$0.94+$5.59+$8.99

Refi party got started last week

The volume of refinance applications jumped 22 percent this week compared with the previous week, according to the Mortgage Bankers Association weekly survey. Applications had increased 66 percent in the previous week's survey.

Lenders say they have been contacting their clients to make them aware that they could save by refinancing with the current rates. Many borrowers are surprised to learn that their payments can be reduced, says John Stearns, a mortgage banker at American Fidelity Mortgage Services in Mequon, Wisconsin.

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"Everyone is surprised that rates are this low," he says.

Global economic concerns have kept a lid on rates even though the economy in the U.S. is improving and the job market has strengthened, Stearns adds.

Punch bowl will go away someday

Mortgage specialists don't expect rates to jump for now, but rates will rise when the Federal Reserve raises the federal funds rate, or even before that.

"We all know that at some point the Fed is going to raise rates," says Jim Sahnger, a mortgage planner for Schaffer Mortgage in Palm Beach Gardens, Florida. That could happen as early as the middle of the year or even next year, depending on what the Fed decides.

"For people who are sitting out there with rates over 5 percent, it makes sense for them to do something now," he says.

Stearns agrees that borrowers shouldn't try to time the market.

"When rates go down, it is very gradual," Stearns says. "When they go up, it's a blink of an eye. You never know when it is going to happen until it does."

Buyers have reason to celebrate

Homebuyers who are ready to buy also should act quickly and lock a rate, Stearns adds. But you shouldn't buy a home just to take advantage of low rates, he says.

Housing market specialists expect the housing market to continue to strengthen this year, especially if rates remain low.

Homebuilders also are optimistic. Housing starts rose 4.4 percent nationwide in December, to a seasonally adjusted annual rate of 1.09 million units, according to the U.S. Commerce Department.

"With overall starts ending the year above 1 million units for the first time since 2007, we expect this momentum to carry forward in 2015," says David Crowe, chief economist of the National Association of Home Builders. "A growing labor market and strengthening economy will spur steady growth in single-family housing production in the year ahead."


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