Mortgage applications and refinancing are spiking after the Fed lowered interest rates

Ben Kesslen
·2-min read
Photo: Mario Tama (Getty Images)
Photo: Mario Tama (Getty Images)

Mortgage applications and refinancings soared after the Fed lowered interest rates for the first time since 2020, according to new data from the Mortgage Bankers Association (MBA) survey.

Mortgage applications jumped 11% for the week ending Sept. 20 compared with the week earlier, reaching their highest level since July 2022. In that same week, the refinance index increased 20 percent from the previous week and a whopping 175% from the same week last year, according to the MBA.

“The 30-year fixed rate decreased for the eighth straight week to 6.13 percent, while the FHA rate decreased to 5.99 percent, breaking the psychologically important 6 percent level,” Joel Kan, the MBA’s vice president and deputy chief economist, said in a press release.

Refinance rates now account for the majority of applications, MBA data showed.

“Average loan sizes were higher both for purchase and refinance applications, which pushed the overall average loan size to its highest in the survey’s history at $413,100,” Kan said.

Interest rates are now set at 4.75%-5.0% after the Fed voted last week to lower them by 50 basis points, bringing rates down from two-decade highs.

Mortgage rates had been declining for weeks in anticipation of the move, and while there has been significant progress, experts say the housing market could take a long time to get back to normal.

There were almost 36% more homes for sale on a typical day in August compared with a year ago — the highest level since May 2020, Realtor.com (NWS) found.

“While rates may continue to fall as the Fed provides more guidance on its future monetary policy, the majority of the adjustment in mortgage rates appears to have already been priced in,” Ruben Gonzalez, chief economist at Keller Williams, said in a statement.

Gonzalez said sales remain “sluggish” and buyers remain cautious. “While home prices are still growing, the pace of appreciation has slowed, indicating a shift toward a more balanced market as it gradually adapts to changing conditions,” he noted.

— Rocio Fabbro contributed to this article.

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