Mortgage refinance demand surges 16% with interest rates at their lowest in over a year

• The interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 6.82% to 6.55%.
• The number of applications to refinance a home loan increased by 16% this week, representing a 59% increase compared to the same week last year.
• The number of mortgage applications for purchasing a home rose by 1% in the week, but was still 11% lower compared to the same week last year.

Last week, mortgage interest rates reached their lowest point since May 2023, resulting in a significant increase in mortgage demand from both homebuyers and current homeowners.

Last week, the Mortgage Bankers Association's seasonally adjusted index showed a 6.9% increase in total mortgage application volume compared to the previous week. This was the highest level since January of this year.

The interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 6.82% to 6.55%, with points decreasing from 0.62 to 0.58, 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 doveish communication from the Federal Reserve and a weak jobs report, which added to concerns of an economy slowing more rapidly than expected.

The number of applications to refinance a home loan increased by 16% this week, which is 59% higher than the same week last year. Despite the significant percentage increase, it is important to note that the base for these increases is small. The majority of borrowers today have loans with rates below 5%. However, there are less than one million borrowers who can potentially benefit from a refinance and reduce their current rate by at least 75 basis points.

The number of mortgage applications for purchasing a home rose by 1% in the week, but was still 11% lower compared to the same week last year.

Although rates decreased, purchase activity experienced minimal growth, with an increase in conventional applications countered by a decline in government applications. In some regions, for-sale inventory is slowly rising, and homebuyers may be waiting for lower rates before entering the market, according to Kan.

This week, mortgage rates decreased initially, but then increased suddenly due to positive economic data.

When the bond market forces a rapid shift to high interest rates, it often results in significant drops in daily mortgage rates, as seen in several instances where quick moves to long-term highs have led to such drops, according to Matthew Graham, chief operating officer at Mortgage News Daily.