The Mortgage Bankers Association reported that last week, the interest rate for the most popular U.S. home loan dropped to 6.13%, the lowest it has been in approximately two years. As a result, there was an increase in refinancing activity. The data revealed that the average contract rate on a 30-year fixed-rate mortgage decreased by 2 basis points for the week ending on Sept. 20.
This decline was much smaller than the half-of-a-percentage point policy rate cut recently implemented by the Federal Reserve. Prior to the Fed’s action, mortgage rates had been steadily decreasing for several weeks. In comparison to July, they are now over three-quarters of a percentage point lower, and compared to the peak in October 2023, they have dropped by more than 1.75 percentage points.
Homeowners are taking advantage of the reduced rates by applying to refinance existing home loans, resulting in a significant increase in refinancing activity. According to the data, refinancing now makes up more than 57% of all mortgage applications, surpassing the historical median of 48%.
