Mortgage refinancing applications have surged to a two-year high due to lower rates, providing homeowners with the opportunity to refinance at more favorable terms. According to the Mortgage Bankers Association (MBA), mortgage refinancing applications reached their highest level in over two years, with a 34.5 percent increase compared to the previous week and a staggering 118 percent increase compared to the same period last year.
Joel Kan, the vice president of the MBA, stated that the decrease in rates for both 30- and 15-year fixed-rate mortgages contributed to the surge in refinancing applications. This trend, along with the previous week’s rate movements, created a strong week for application activity as borrowers with higher rates took advantage of the opportunity to refinance.
Overall mortgage applications also saw an increase of 16.8 percent from the previous week, reaching the highest level since January 2023. Additionally, purchase applications increased by 3 percent, indicating that prospective homebuyers are slowly reentering the market.
The recent decline in mortgage rates is a result of U.S. Treasury yields moving downward, driven by signs of weakness in the labor market and other economic indicators. This has fueled expectations that the Federal Reserve will soon cut interest rates. The weak jobs report on August 2 caused yields on the 10-year Treasury note, which strongly influence mortgage rates, to drop to their lowest levels since December 2023. As a result, the rates on the 15- and 30-year fixed mortgages briefly reached their lowest levels in over a year.
Although rates have ticked up slightly since then, they have continued to decrease on a weekly basis for two consecutive weeks. As of August 14, the rates stood at 6.49 percent for the 30-year fixed-rate mortgage and 5.95 percent for the 15-year fixed-rate mortgage, according to the MND index. Freddie Mac also reported that mortgage rates hit their lowest level in over a year during the week of August 8, attributing the decrease to the weak jobs report.
Sam Khater, Chief Economist at Freddie Mac, mentioned that the decline in mortgage rates increases the purchasing power of prospective homebuyers and should stimulate their interest in making a move.
However, despite the favorable mortgage rates, housing prices continue to rise, making homeownership an increasingly distant dream for many Americans. Data from the National Association of Realtors (NAR) reveals that the median price of a single-family existing home in the United States has grown by 4.9 percent over the past year, reaching $422,100.
NAR’s chief economist, Lawrence Yun, acknowledged that this is great news for homeowners who are experiencing wealth gains. However, it poses challenges for those aspiring to buy a home, as the required income to qualify for a mortgage has approximately doubled in just a few years.
In addition to rising prices, first-time homebuyers also face limited inventory in the second quarter. However, NAR predicts that housing affordability will improve in the coming months as more supply enters the market.
According to NAR, families in 48 percent of America’s housing markets need a qualifying income of at least $100,000 to afford a 10 percent down payment mortgage. This highlights the affordability challenges that many potential homebuyers are currently facing.
