Homeowners scramble to refinance as U.S. mortgage rates hit two-year lows

By Aarthi Swaminathan

30-year mortgage rate falls to lowest level since September 2022, industry group says

The numbers: Applications for mortgages rose sharply as homeowners and home buyers pounced on falling mortgage rates.

The 30-year rate fell to the lowest level since September 2022 ahead of a highly anticipated rate cut by the Federal Reserve on Wednesday.

The central bank cut its benchmark interest rate by 50 basis points, which is roughly line with what the mortgage market was expecting, John Toohig, head of whole loan trading at Raymond James (RJF), told MarketWatch.

"Many prospective homebuyers and sellers are watching the Fed, expecting a big drop in mortgage rates after today. However, much of today's rate cut has largely been baked in," Lisa Sturtevant, chief economist at Bright MLS, said in a statement. "It would be surprising to see a substantial drop in mortgage rates this week."

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The drop in rates over the last week pushed the market composite index - a measure of mortgage-application volume - up in the last week, the Mortgage Bankers Association said Wednesday.

The market index rose 14.2% on a weekly basis, to 266.8 for the week ending September 13. A year ago, the index stood at 192.1.

Key details: The purchase index - which measures mortgage applications for the purchase of a home - rose 5.4% from the previous week.

The refinance index rose by 24.2%.

The average rate for a 30-year mortgage for homes sold for $766,550 or less was 6.15% for the week ending Sept. 13. That's down from 6.29% the week prior.

The rate for jumbo loans, or a 30-year mortgage for homes sold for more than $766,550, was 6.41%, down from 6.56%.

The average rate for a 30-year mortgage backed by the Federal Housing Administration was 6.12%, down from 6.24%.

The 15-year rate was down to 5.42%, from 5.71% from the week before.

The rate for adjustable-rate mortgages was down to 5.66%, from 5.85%.

The big picture: A big drop in mortgage rates has prompted homeowners to refinance their home loans. Refinance applications are up nearly 127% from a year go.

But home buyers continue to hold back. Though falling mortgage rates help improve how much home buyers can afford, high home prices and low inventory still remain a challenge for many.

What the MBA said: "Refinance applications were up 24% - more than double last year's pace, with both conventional and government activity jumping to the fastest pace of refinancing since 2022," Joel Kan, deputy chief economist at the MBA, said in a statement.

"There was also an increase in purchase applications," he added, "and it is notable that conventional purchase applications increased to a pace ahead of last year, which also drove overall purchase applications very close to year-ago levels."

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-Aarthi Swaminathan

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09-19-24 0550ET

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