U.S. mortgage refinancing surges by most since 2020 on lower rates

US mortgage refinancing surged last week by the most since the early days of the pandemic as borrowing costs continued to drift lower.

The Mortgage Bankers Association’s refinancing index jumped 34.5% to a more than two-year high of 889.3. Mortgage applications to purchase a home climbed 2.8% in the week ended Aug. 9, the largest advance since the first week of June.

The contract rate on a 30-year fixed mortgage eased 1 basis point to 6.54%, the MBA data showed Wednesday. The rate on a 15-year fixed mortgage dropped 7 basis points to 5.96%, the lowest since May of last year.

The 15-year fixed mortgage is now 8 basis points lower than the rate on a five-year adjustable mortgage, the largest difference since January 2022.

MBA’s overall index of applications, which includes refinancing and purchase activity, jumped 16.8% last week – the most since January last year.

Mortgage rates track US government securities, and the yield on the 10-year Treasury note has rebounded after sliding in the previous week to the lowest level this year.

Investors have trimmed expectations that the Federal Reserve will undertake more aggressive interest-rate reductions, though they still expect policymakers will begin reducing borrowing costs at their September meeting.

Despite mortgage rates holding below 7%, still-rising housing prices are limiting purchase activity. Figures out Tuesday from the National Association of Realtors showed prices rose 4.9% in the second quarter from the same period a year ago.

In 48% of US markets, an income of at least $100,000 is required to afford a mortgage with a 10% down payment, according to the NAR. In the first quarter, that was the case in 40.7% of the nation’s real estate markets.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.