Mortgage Refinance Demand Up 94% YoY as Interest Rates Drop

Mortgage refinance demand has jumped 94% compared to last year, driven by a decrease in interest rates. Homeowners are increasingly refinancing their mortgages to benefit from lower borrowing costs. This significant rise in refinance activity highlights how favorable interest rates are influencing the housing market and encouraging homeowners to take advantage of the current financial conditions.

Mortgage demand is increasingly focused on refinancing, as interest rates have dropped for the fifth consecutive week.

Last week, total mortgage application volume rose by just 1.6% compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average interest rate for 30-year fixed-rate mortgages with conforming balances fell to 6.43% from 6.44%, while points increased to 0.56 from 0.54 for loans with a 20% down payment. This rate is 78 basis points higher than a year ago.

Refinance applications decreased by 0.3% for the week but were up 94% year-over-year. While this increase is substantial, it comes from a low baseline. Nonetheless, refinancing remains a strong area in a market otherwise struggling with high interest rates and weak homebuying activity.

Joel Kan, an MBA economist, noted that although refinance applications slightly declined, they continue to show robust annual growth as borrowers seek to lower their monthly payments. The refinance share of applications averaged nearly 46% in August, the highest since March 2022.

Applications for new home purchases rose 3% for the week but remain 4% lower than the same week last year. Home sales have been sluggish throughout the summer due to high home prices, with the drop in interest rates not yet sufficient to stimulate significant buyer activity.

The increase in mortgage applications was primarily driven by government loans, such as FHA and VA loans, which are popular among lower-income buyers.

Mortgage rates remained stable on Tuesday, with attention now turning to the upcoming monthly employment report and other economic data later in the week.

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Source: CNBC‍