Mortgage Refinancings Surge as Rates Drop, Inflation Cools

In the immortal words of realtors, “date the rate, marry the home.” Right now, homeowners are sowing their wild oats.

As mortgage rates drop in anticipation of an all-but-certain cut to federal interest rates next month, current homeowners are using the opportunity to refinance their mortgages at the fastest pace since 2022. And they may just be getting started. 

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Rejoice, anxious millennial prospective home-buyers. The contract rate on a 30-year fixed mortgage eased 1 basis point to 6.54%, according to data from the Mortgage Bankers Association released Wednesday. Meanwhile, the rate on a 15-year fixed mortgage fell by 7 basis points to 5.96%, per MBA data, the lowest point since May 2023. Sure, it’s not what some lucky peers scored during the ultra-low interest rates of the early pandemic years, but it’s not nothing, either.

For some current homeowners, it’s certainly enough to refinance. The MBA’s mortgage refinance index spiked just above 34% last week, bringing it to its highest point in just over two years. But even then, a surge by 2024 standards is nothing compared to the pandemic-era frenzy — and may be nothing compared to what’s to come in the next year:

• The mortgage refinance index rose to 889.3 points, but that’s still nothing compared to the early pandemic years, when interest rates plummeted to near zero and the index reached as high as 6,400 points; between late 2019 and early 2022, the index hovered above 2,500 points. It hasn’t been as low as it is now since the turn of the century.
• Meanwhile, the US Labor Department’s latest consumer-price index report, also released Wednesday, showed inflation in July came in at 2.9%, its first time below 3% since 2021 — all but guaranteeing a rate cut by the Federal Reserve in September, which should push mortgage rates down even further.

“A significant amount of homeowners still have mortgages with rates in the [5% range], so once we see rates dip 1% or more below that, we will definitely see a flood of refinances,” Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage, told The Daily Upside.

Good News, Bad News: On the flip side, homes aren’t getting cheaper. According to data released Tuesday by the National Realtors Association, home prices increased nearly 5% year-over-year in the second quarter. Sorry, millennials: Even when you win, you still lose.