Mortgage Refinance Hits 2-Year Peak as Rates Drop

Last week, mortgage rates dropped to their lowest since March, leading to a notable spike in refinancing activity, although homebuyers remained cautious.

The Mortgage Bankers Association reported a 15% increase in home loan refinance applications compared to the previous week, marking the highest level since August 2022. This represents a 37% increase from the same period last year when mortgage rates were similar. Despite this growth, refinance demand is still significantly lower, over 70% less than in early 2020 before the pandemic.

The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.87% from 7.00%. Points dropped to 0.57 from 0.60 (including the origination fee) for loans with a 20% down payment.

“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower,” said Joel Kan, MBA’s vice president and deputy chief economist.

On the other hand, mortgage applications for purchasing homes fell by 3% for the week and were 14% lower than the same week last year. Homebuyers face a tough market with limited and expensive options. Many are holding off, expecting rates to drop further. More homes are slowly becoming available, and sellers are starting to reduce prices, especially for properties that have been on the market for some time.

Even with a stronger-than-expected retail sales report, mortgage rates have remained steady at the start of this week.

For more updates on mortgage trends and their implications, visit KreditSanta.