Mortgage refinance applications surge to a 2-year peak due to decreasing interest rates.

• The number of applications to refinance a home loan increased by 15% in the most recent week relative to the prior week.
• The interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 7.00% to 6.87%.
• The number of mortgage applications for purchasing a home decreased by 3% this week and was 14% lower compared to the same week last year.

Since last week, mortgage rates have fallen to their lowest point since March, leading to a surge in refinancing demand. Despite this, homebuyers appeared unaffected.

The number of applications to refinance a home loan increased by 15% last week, reaching its highest level since August 2022, according to the Mortgage Bankers Association's seasonally adjusted index. This was a 37% increase compared to the same week one year ago when mortgage rates were the same.

Despite the significant decline in refinance demand, it is still more than 70% lower than it was before the Covid-19 pandemic hit.

The interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.87% from 7.00%, with points decreasing to 0.57 from 0.60 (including the origination fee) for loans with a 20% down payment.

According to Joel Kan, MBA's vice president and deputy chief economist, mortgage rates decreased last week due to recent indications of decreasing inflation and the increased probability of Fed rate cuts later this year.

Mortgage applications for purchasing homes decreased by 3% during the week and were 14% lower than the same week a year ago. With the possibility of interest rates dropping further, buyers may be delaying their purchases in the current lean and expensive market. As more homes become available, sellers are lowering their prices, particularly for properties that have been on the market for an extended period.

Despite a stronger-than-expected report on retail sales, mortgage rates have remained relatively stable at the beginning of the week.