A sign was posted in front of a home for sale in San Rafael, California, on August 7, 2024, as captured by Justin Sullivan of Getty Images.
There has been a notable decline in mortgage rates, which have reached their lowest in two years, prompting current homeowners to seek potential savings. According to the Mortgage Bankers Association’s seasonally adjusted index, applications to refinance home loans surged by 20% last week compared to the previous week. This demand is 175% higher than the same period last year.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased from 6.15% to 6.13%. The points, including the origination fee, increased slightly to 0.57 from 0.56 for loans with a 20% down payment. This rate is 128 basis points lower than the same period last year, which was 7.41%.
Joel Kan, the Mortgage Bankers Association’s vice president and deputy chief economist, noted in a release, “The 30-year fixed rate decreased for the eighth straight week to 6.13%, while the FHA rate decreased to 5.99%, breaking the psychologically important 6% level. As a result of lower rates, week-over-week gains for both conventional and government refinance applications increased sharply.”
The share of refinance applications rose to 55.7%. Despite this significant increase from last year, Kan pointed out that the level of refinance activity remains modest compared to previous refinance waves.
Part of this can be attributed to the seasonal slowdown in homebuying. Mortgage applications to purchase a home increased by just 1% for the week and were 2% higher than the same week last year. Buyers continue to face high home prices and a limited supply of available homes.
Kan also mentioned, “Average loan sizes were higher both for purchase and refinance applications, which pushed the overall average loan size to its highest in the survey’s history at $413,100.”
Currently, mortgage rates have not shown significant changes at the start of the week and are expected to remain steady while awaiting key economic data due later in the week and in early October.
