Now is the time to refinance a mortgage: here’s why.
Applications for home mortgages loans dropped for the second week despite a decline in fixed mortgage interest rates this month. A survey of national lenders said the seasonally adjusted index of mortgage applications, which includes both purchases and refinancing, dropped 4.5 percent at the end of August. The week before, the index dropped .7 percent. The survey’s adjusted purchase index fell 3.6 percent to 470.6. The refinancing index also dropped 5.4 percent to 2,187.8.
Fixed 30 year mortgage interest rates dropped 5 basis points, to an average of 5.73 percent, versus 5.78 percent in the week before. The 30 year mortgage interest rate, considered a benchmark, has dropped 5.91 percent at the end of August. The 30 year mortgage interest rate is below its 2005 high of 6.08 reached in March and still above the 2005 low of 5.47 back in June. It is also higher than where it stood last summer when the mortgage interest rate was 5.75 percent. Fixed 15 year mortgage interest rates averaged 5.36 percent this week, down from 5.41 percent.
Adjustable interest rate mortgage loans have gone up. Interest rates on one year adjustable interest rate mortgages loans went up 4.88 percent last week from 4.84 the week before. Demand for this type of loan has been on the decline this moth. ARMs were 27 percent of the total mortgage loan applications last week, which was down from 28.1 percent the week before. With ARMs, lower initial payments allow prospective homeowners to buy homes they may not be able to afford with a fixed interest rate mortgage loan.
In the survey for the week ending August 26th, refinancing increased overall as a percentage of mortgage applications taken, up by 43.8 percent. To learn more about refinancing your home, sign up for our free guide “Five Things You Need to Know Before Refinancing a Mortgage,” using the link below.