Homeowners Aren’t Waiting For A Rate Cut To Refinance

Homeowners buried under high borrowing costs aren’t waiting around for an interest rate cut. 

Mortgage rates dipped to the lowest level since October last week, and applications for refinancing loans surged by nearly 60%, according to new data from the Mortgage Bankers Association.

“Homeowners with larger loans jumped first, as the average loan size on refinances reached its highest level in the 35-year history of our survey,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a release.

The MBA report showed that heightened interest in refinancing helped push up overall demand for mortgages by nearly 30% in the week ending Sept. 12 compared with the prior week. 

Mortgage Rates With Treasury Yields

The surge in borrowing comes as the 30-year fixed-rate mortgage dropped to 6.39%, still elevated by historical standards, but lower than buyers have seen throughout this year. High borrowing costs are one factor contributing to the frozen housing market conditions that have pushed sales down to their lowest levels in decades. 

While mortgage rates have been ticking lower in recent weeks, some are anticipating that a Federal Reserve move to cut interest rates could help ease borrowing costs even more. 

The federal funds rate, which the Fed uses to control short-term interest rates, can lead to lower borrowing costs for many types of loans. But mortgage rates are more closely aligned with the 10-year Treasury yield, which recently hit its lowest levels since April in anticipation of a Federal Reserve interest rate cut. 

The Fed will announce its latest decision on interest rates following the conclusion of its meeting on Wednesday.