Homeowners are rushing to refinance as mortgage rates decrease from 23-year highs

Homeowners are rushing to refinance as mortgage rates decrease from 23-year highs

LOS ANGELES — A recent pullback in mortgage rates is spurring more homeowners to refinance their home loan and lower their monthly payments.

The Mortgage Bankers Association’s refinance index, which tracks home loan application volume, surged 16% last week from the previous week to its highest level in two years, the association said Wednesday.

Refinance applications were up nearly 60% versus the same week last year.

Home loan applications rose overall last week to their highest level since January, though much of that was due to the surge in refinance applications.

Despite the lower borrowing costs, applications for loans to buy a home rose only 0.8% from the previous week and were down about 11% from a year earlier, the MBA said.

For many home shoppers, mortgage rates remain too high, given record-high housing prices and a chronic shortage of properties on the market.

“For-sale inventory is beginning to increase gradually in some parts of the country and homebuyers might be biding their time to enter the market given the prospect of lower rates,” said Joel Kan, the MBA’s deputy chief economist.

The average rate on a 30-year mortgage was 6.73% last week, its lowest level since early February, according to mortgage buyer Freddie Mac.

After jumping to a 23-year high of 7.79% in October, the average rate has mostly hovered around 7% this year — more than double what it was just three years ago.

The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, extending the nation’s housing slump into its third year.

Rates have mostly eased in recent weeks as signs of easing inflation and a cooling job market have raised expectations that the Federal Reserve will cut its benchmark interest rate next month. Mortgage rates are influenced by several factors, including how the bond market reacts to the Fed’s rate moves.

“If the recent drop in longer-term rates is sustained, then we expect to see another uptick in refinance applications and subsequent refinance mortgage volumes this week,” said Doug Duncan, chief economist at Fannie Mae. The mortgage buyer’s own index of refinance activity shows that refinance applications climbed 20% last week from the previous week.

Rates will have to fall further before more homeowners are incentivized to refinance, given that some 86% of all outstanding home mortgages have an interest rate below 6%, and more than three quarters have a rate 5% or lower, according to Realtor.com.

Still, expectations that rates will continue to ease and prompt more homeowners to refinance have helped lift shares in mortgage companies so far in the third quarter.

Rocket Cos. is up 28.5%, United Wholesale Mortgage gained 19.5% and LoanDepot is up 47.9%.

In recent months, homeowners across the country have been rushing to refinance their mortgages as interest rates have decreased from 23-year highs. This sudden drop in rates has created a unique opportunity for homeowners to save money on their monthly mortgage payments and potentially reduce the overall cost of their loans.

The spike in mortgage rates over the past year has been a major concern for many homeowners, as it has made owning a home more expensive. However, the recent decrease in rates has provided some relief for those looking to refinance their mortgages.

One of the main reasons why homeowners are rushing to refinance is to take advantage of the lower interest rates. By refinancing at a lower rate, homeowners can potentially save thousands of dollars over the life of their loan. This can result in lower monthly payments, more manageable debt, and even the ability to pay off their mortgage sooner.

Additionally, refinancing can also allow homeowners to tap into their home equity and access cash for home improvements, debt consolidation, or other financial needs. This can be especially beneficial for homeowners who have seen their home values increase in recent years and want to leverage that equity to improve their financial situation.

Another reason why homeowners are eager to refinance is to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. With interest rates on the rise, many homeowners with ARMs are looking to lock in a lower fixed rate to protect themselves from future rate hikes. By refinancing to a fixed-rate mortgage, homeowners can have peace of mind knowing that their monthly payments will remain stable and predictable.

Overall, the current decrease in mortgage rates presents a valuable opportunity for homeowners to save money, reduce their debt, and improve their financial situation. If you are a homeowner who is considering refinancing, now may be the perfect time to take advantage of these lower rates and secure a better financial future for yourself and your family.