A fourth consecutive week of falling mortgage rates prompted a surge in activity from homeowners and buyers, with total mortgage application volume climbing 7.1% last week, according to a seasonally adjusted index from the Mortgage Bankers Association.
The average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance of $806,500 or less fell to 6.30% from 6.37%. This marks the lowest average rate recorded since September 2022. Points for these loans, which assume a 20% down payment, also decreased slightly to 0.58.
Refinancing applications, which are highly sensitive to rate fluctuations, jumped 9% for the week and were 111% higher than the same period last year, when the average 30-year fixed rate was 43 basis points higher.
“This recent decline in rates spurred the second consecutive week of increased refinance activity, driven mainly by conventional refinance applications,” said Joel Kan, MBA’s vice president and deputy chief economist. He noted that as lower rates prompted more borrowers to choose fixed-rate loans, the share of adjustable-rate mortgage (ARM) applications dipped below 10%.
Kan also observed that the average loan size for a refinance application remained elevated at $393,900, suggesting that borrowers with larger loans are capitalizing on the potential for significant savings.
Mortgage applications for home purchases also rose, increasing 5% for the week and standing 20% higher than a year ago, despite the ongoing challenges of high home prices and economic uncertainty. However, Kan noted an exception: USDA loan applications dropped by over 26%, an impact he attributed to the ongoing government shutdown.
Looking ahead, mortgage rates continued their downward trend at the start of this week, according to a separate survey by Mortgage News Daily. With the government shutdown limiting other economic data, market attention is now intensely focused on the Federal Reserve’s upcoming announcement.
“We already know the Fed will be cutting rates, and that rate cut has no bearing on what happens to mortgage rates going forward,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “Rather, it would be the tone of the Fed’s press conference, or the nature of any changes in the Fed’s bond buying policies.”
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