Mortgage rates took a significant dip last week, falling to their lowest point in over 18 months. This welcome news has encouraged homeowners to refinance their existing mortgages, seeking to take advantage of lower interest rates and potentially save money on their monthly payments.
According to the Mortgage Bankers Association (MBA), the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (up to $766,550) decreased to 6.29 percent from 6.43 percent. This marks the sixth consecutive week of declining rates, a trend that has breathed new life into the refinancing market. The average interest rate for 30-year fixed-rate mortgages with jumbo loan balances (above $766,550) also saw a decrease, dropping to 6.56% from 6.73%.
The decline in mortgage rates wasn’t limited to 30-year fixed-rate loans. The average rate for 15-year fixed-rate mortgages also dipped, falling to 5.71% from 5.98%.
The drop in rates has directly translated to increased refinance activity. The refinance share of mortgage applications rose to 46.7 percent of total applications, up from 46.4 percent the previous week. This surge in refinancing activity highlights the impact of lower rates on homeowners’ decisions.
While the decline in rates has sparked a revival in refinancing, the housing market remains challenged. Purchase applications, while edging closer to last year’s levels, are still affected by affordability issues and limited inventory.
“Mortgage rates declined for the sixth consecutive week, with the 30-year fixed rate decreasing to 6.29 percent, the lowest rate since February 2023,” said Joel Kan, MBA’s vice president and deputy chief economist. “With rates almost a full percentage point lower than a year ago, refinance applications continue to run much higher than last year’s pace.”
Despite the drop in rates, affordability challenges and other factors such as limited inventory might still be hindering purchase decisions.
The impact of these rate changes on the housing market is a topic of ongoing discussion. Investors are closely monitoring the performance of mortgage lenders and real estate companies. Invesco Mortgage Capital Inc. IVR, Rocket Companies Inc RKT, and Lendingtree (TREE) saw their stock prices trend downward on Wednesday. Exchange-traded funds that hold these stocks also experienced mixed reactions, with some showing gains while others saw losses.
While lower mortgage rates offer a glimmer of hope for homeowners seeking to refinance, the overall health of the housing market remains contingent on factors such as affordability, inventory levels, and economic conditions.
