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With borrowing costs falling, mortgage borrowers are rushing to refinance their loans.
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Last week, mortgage rates fell to their lowest level since May of last year, according to data from Freddie Mac.
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Refinancing applications rose 34.5% to their highest level in over two years.
With borrowing costs falling for the second week in a row, homeowners are rushing to refinance their mortgages.
The 30-year mortgage rate fell for the second week in a row last week to 6.47%, the lowest since May 2023, according to data from Freddie Mac.
The decline triggered a surge in debt restructuring applications as borrowers sought to take advantage of lower interest rates.
The Mortgage Bankers Association’s refinance index rose to its highest level in more than two years, up 34.5 percent from the previous week and 118 percent from the same period last year.
“Rates on 30- and 15-year fixed-rate mortgages fell for the second week in a row. Combined with the previous week’s rate moves, this led to another strong week of application activity as higher-rate borrowers took advantage of the opportunity to refinance,” MBA chief economist Joel Kan said in a statement on Wednesday.
The drop in mortgage rates may also be creating more optimism in the real estate market in general. The total number of applications rose by about 17 percent, while the number of purchase applications increased by 3 percent compared to the previous week. “There were slight increases in various loan types, indicating that potential home buyers are slowly getting back into the market,” Kan said.
Experts expect these trends to continue. Chen Zhao, head of economic research at Redfin, said mortgage rates will likely continue to fall through the end of the year, although they will still not reach the historic lows seen during the pandemic.
“It’s quite possible that mortgage rates will be in the lower sixths by the end of this year,” Zhao said in an interview with Business Insider. “By the end of next year, they could be in the upper fifth or mid-fifths.”
Others say the decline in mortgages could be an exaggerated reaction to weak jobs reports and the historic sell-off earlier this month.
“Mortgage rates fell to their lowest levels in over a year this week, likely reflecting an overreaction to a less than favorable jobs report and turmoil in financial markets for an economy that is still on solid footing,” said Sam Khater, chief economist at Freddie Mac.
Read the original article on Business Insider
