Last week, we saw a flurry of activity in the mortgage refinancing market. Homeowners looking to refinance their home loans jumped into action as fears of rising mortgage rates spread. People are looking to refinance as soon as possible, before interest rates start to go up even further.

Rate Increases

Last week, the average contract interest rate for 30-year fixed-rate mortgages increased from 2.86% up to 2.88%. Those numbers are still record lows, but the small rate increase definitely caught the attention of many who are expecting mortgage rates to keep increasing in 2021. As the economy recovers from the pandemic, the mortgage market will self-correct and rates will eventually have to rise. This is causing a spike in mortgage financing demand.

Timing is Everything

Many homeowners scrambling to take action now. Many waited until we hit the lowest of lows, but that can be a slippery slope as nobody knows exactly when there could be a rate spike upward. This small increase was just enough to spark a jump in refinance application activity. In fact, mortgage refinance demand increased by 20%, with an application volume that was more than 93% higher than it was this week in 2019. Meanwhile, new conforming mortgage applications rose 8% last week (10% higher than this time a year ago).

“Booming refinance activity in the first full week of 2021 caused mortgage applications to surge to their highest level since March 2020, despite most mortgage rates in the survey rising last week,” said Joel Ken, who is vice president of economic and industry forecasting for the Mortgage Bankers Association (MBA). “The expectation of additional fiscal stimulus from the incoming administration, and the rollout of vaccines improving the outlook, drove Treasury yields and rates higher.”

Reactions to the Rate Hike

A 0.02% rate increase may not seem like much, but every fraction of a percentage point makes a significant difference in the mortgage market with such high loan amounts. A small bump upward was more than enough to spark this spike in mortgage refinancing application activity.

Right now, we are dealing with very low housing supply and fast-rising home prices because of high buyer demand. Yet, the historically low mortgage rates have created favorable conditions for both sides of the real estate transaction. Home buyers are able to afford more, and this leads to more aggressive purchase offers. Sellers are in a position to get great returns because of low inventory. Those content to stay in their homes are looking at their mortgage refinancing options to save money on their home loans. The market has been moving fast, but fears of rising mortgage rates are always looming. This is pushing more borrowers to act now, especially those looking to refinance at a lower rate while they still can.

FHA Loan Application Increase

Another interesting trend from last week is that there was a 9.2% increase in Federal Housing Administration (FHA) loan applications. That is a positive sign that more first-time home buyers and lower-income buyers are reentering the real estate market.

The point is that if you have been waiting to buy or refinance at the lowest possible rate, you may not want to wait much longer. All signs point toward rising mortgage rates over the course of 2021, so now may be time to act.

If you are looking to buy a new home or refinance your current home loan, call Transparent Mortgage today at (619) 701-3906 or email me at

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.