Mortgage applications have soared to their highest level since July 2022, driven primarily by a significant uptick in refinancing activity as mortgage rates continue to decline. According to the Mortgage Bankers Association (MBA), total applications to refinance or purchase a home increased by 11% in the week ending September 20 compared to the previous week.
Refinancing applications led the surge, jumping 20% week over week as homeowners seized the opportunity to lock in lower rates. "As a result of lower rates, week-over-week gains for both conventional and government refinance applications increased sharply," said Joel Kan, MBA's vice president and deputy chief economist.
This marks the second consecutive week of double-digit gains in mortgage applications. Refinancings now comprise nearly 56% of all mortgage applications, signaling a shift in homeowner behavior as the typical summer homebuying season winds down.
The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances ($766,550 or less) decreased to 6.13% from 6.15%, according to MBA data. Points increased slightly to 0.57 from 0.56 for loans with a 20% down payment. Freddie Mac reported that rates have steadily declined over the summer, reaching 6.09% as of September 19, down more than a percentage point from a year earlier.
"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," Mr. Kan noted. The reduction in rates has made refinancing more attractive, leading to a 175% increase in refinancing applications compared to the same week last year.
Despite the impressive year-over-year growth, Mr. Kan pointed out that the level of refinance activity remains modest when compared to prior refinancing booms. Part of the reason is the seasonal slowdown in homebuying, as well as lingering challenges in the housing market.
Mortgage applications for home purchases rose just 1% for the week and were only 2% higher than the same week one year ago. Potential buyers are still grappling with high home prices and a limited supply of houses for sale, factors that have kept many on the sidelines during the summer buying season.
"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," Mr. Kan added. This suggests that while fewer homes are being sold, those that are changing hands tend to be at higher price points.
