Refinancing Surges 175% Over Last Year as Mortgage Rates Fall

Key Takeaways

• Mortgage rates fell to 6.13%, dropping for the eighth straight week to reach the lowest levels in two years.
• The drop in rates sent mortgage demand surging by 11%, with most of the increase coming from a surge in refinancing applications.
• Government-backed loan rates also moved lower, with Federal Housing Administration mortgage rates dropping below 6%.

Mortgage rates fell for the eighth straight week, stoking another surge in refinancing as homebuyers race to refinance high-rate mortgage loans.

The 30-year, fixed-rate mortgage declined to 6.13% in the week ending Sept. 20, its lowest rate in two years. The decline in borrowing costs drove up demand for mortgages, with application volume for home loans increasing by 11% compared to the prior week, Mortgage Brokers Association (MBA) data showed. 

Consumers also found good rates with government-backed loans, with rates for Federal Housing Administration (FHA) loans dropping below 6%. 

“As a result of lower rates, week-over-week gains for both conventional and government refinance applications increased sharply,” said Joel Kan, MBA vice president and deputy chief economist.

Refinancing Surges As People Seek Interest Rate Relief

The data showed refinancing activity surged again. Applications for refinancing increased by 20% compared with the prior week. Compared with a year ago, when the 30-year mortgage was around 7.5%, refinancing levels were higher by 175%. 

“The refinance share of applications is now at 55.7%, and while the level of refinance activity is still modest compared to prior refi waves, they now account for the majority of applications, given the seasonal slowdown in purchase activity,” Kan said. 

Home purchase activity was only slightly higher than the previous week, with the average loan size for home purchases at $447,700.

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