Homeowners rush as 30-year fixed mortgage rate drops

Mortgage rates trended down this week, with the 30-year fixed-rate mortgage (FRM) dipping to its lowest level in two years, according to Freddie Mac’s latest Primary Mortgage Market Survey (PMMS).

The 30-year FRM averaged 6.08% as of September 26, 2024, down just a fraction from last week’s 6.09%. This is a notable drop from the same time the previous year, when the 30-year FRM averaged 7.31%.

The 15-year FRM showed a slight uptick, averaging 5.16% this week, compared to 5.15% the previous week. A year ago, it averaged 6.72%.

“Although this week’s decline was slight, the 30-year fixed-rate mortgage trended down to its lowest level in two years,” Freddie Mac chief economist Sam Khater said in the PMMS report. “Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment.”

Khater also observed that many looking to purchase a home are playing the waiting game, hoping for further rate reductions as new economic data is released over the next several weeks.

The drop in rates has led to a notable uptick in mortgage application activity, according to the Mortgage Bankers Association (MBA). Overall mortgage applications rose by 11% from the previous week, driven by a surge in refinance applications, which spiked 20%. This continues a trend from the prior week.

MBA deputy chief economist Joel Kan explained the impact of the rate decline, which has led to increases in both conventional and government-backed refinance applications.

“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,” Kan said.

Kate Wood, home and mortgage expert at NerdWallet, said the Federal Reserve’s recent rate cut likely pushed some homeowners to take action.

“Having already fallen enough to more than match last week’s Federal Reserve cut as well as the central bankers’ plans for the rest of 2024, mortgage rates experienced a small rebound this week. Despite that bounce, refinance activity rose as the Fed announcement may have provided the confirmation some homeowners were waiting for. As rates head toward 6%, more homeowners with existing mortgage rates in the 7% range will see a benefit from refinancing, so the market for rate-and-term refinances should finally pick up,” Wood said.

By Candyd Mendoza 27 Sep 2024