It was a big week for demand for mortgage refinancing, sparking a jump in total mortgage applications. According to the Mortgage Bankers Association (MBA), last week saw the largest single week increase for mortgage applications. They were up 10.9% from the previous week, which was the biggest week-over-week increase in refinancing activity since April.
The refinance share of mortgage activity jumped to 46.5% of all applications, an increase from 41.5% a week earlier. This reflects an increasing willingness of homeowners to seek out more favorable terms on loans.
Refinance applications jumped 23% this week. Compared to last month, they are now up 8% from the same time last year. This uptick suggests that homeowners are actively seeking savings through refinancing, even when it involves opting for riskier loan options.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell to 6.67%, a decline from 6.77%. In tandem, the average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) decreased to 5.80% from 6.06%. Because of this, applications for ARMs increased by 25%, hitting their highest share since early 2022. The ARM percentage of total applications is now almost double that, at close to 10%.
While refinancing applications are currently the highest they’ve been in years, we’ve started to see home purchasing applications pick up steam as well. They were up 1% from last week. Compared to the same week last year, purchase applications were up 17%, indicating continued interest in home buying despite fluctuating interest rates.
Joel Kan, an economist at the MBA, pointed out that increased savings-seeking behavior among homeowners reflects broader shifts in the market. He remarked, “As seen in other recent refinance bursts, the average loan size grew significantly to $366,400. Borrowers with larger loan sizes continue to be more sensitive to rate movements.”
Additionally, the monthly Consumer Price Index has sent mixed signals, adding to the uncertainty shrouding today’s economy. It includes the effect of tariffs, but notable declines on price in a number of key categories.
Market analysts such as Matthew Graham think that the chances of a Federal Reserve rate cut have increased for September. He stated, “Shorter-term bonds also improved (no surprise, as they are highly correlated with Fed rate expectations).”