Mortgage bankers have had plenty of time on their hands in recent months. With high home prices and rising mortgage rates, there were fewer buyers and homeowners interested in refinancing.
But what a difference a few basis points make. The Mortgage Bankers Association (MBA) reports mortgage applications have surged 11% in just one week.
Much of that activity came from current homeowners who are refinancing their mortgages. MBA’s Refinance Index increased 20% from the previous week and was 175% higher than the same week one year ago.
People who purchased a home in 2023 with a mortgage rate of 7.15% have rushed to take advantage of rates between 6.09% and 6.15%. The difference 1% makes on a $300,000 30-year fixed-rate loan is $198 on the monthly mortgage payment. That’s a savings of $2,376 a year.
There are costs associated with refinancing a mortgage but that kind of savings can make it worthwhile, depending on how long you intend to own the property.
Refinancing may not have reached its peak
“The refinance share of applications is now at 55.7%, and while the level of refinance activity is still modest compared to prior refi waves, they now account for the majority of applications, given the seasonal slowdown in purchase activity,” said Joel Kan, MBA’s deputy chief economist.
If you qualify for a government-backed mortgage the incentive for refinancing can be even greater, because those mortgage rates are generally lower. For example, in the latest reporting period, MBA found the average FHA mortgage rate had fallen below 6% to 5.99%.
The FHA share of total applications decreased to 15% from 15.2% the week before but the VA share of total applications increased to 18.3% from 16.8% a week earlier.