Earlier this week, mortgage rates fell to their lowest level since April 2023. This drop in rates led to an increase in mortgage applications, particularly a surge in refinance applications. Refinancing your mortgage rate to be just 1% lower can significantly reduce your monthly payment, so it makes sense why many homeowners are refinancing given the substantial drop in rates.
For the week ending August 2, the 30-year fixed mortgage rate dropped to 6.55%, down from 6.82% the previous week, according to the Mortgage Bankers Association (MBA). And on August 5, rates dropped even lower — falling to an average of 6.34%, according to Redfin. Although rates have since risen to 6.47% (as of August 8) that’s still close to the lowest level they’ve been in over a year.
Falling rates are in part due to “doveish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected,” says Joel Kan, MBA’s Vice President and Deputy Chief Economist. The U.S. Department of Labor's July jobs report shows that unemployment rose for the fourth straight month, reaching 4.3% — the highest it's been since October 2021.
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Increase in refinance applications
The drop in rates has led to a significant increase in refinance applications, with mortgage application volume reaching its highest level since January of this year. According to the MBA, refinance applications increased 16% from the previous week and are 59% higher than the same week one year ago.
However, purchase applications only increased 1% from the week earlier and are 11% lower than the same week one year ago. Many homebuyers are holding off on entering the market given the expectation of lower rates.
The Kiplinger interest rate forecast predicts that if the Fed does not cut rates on September 18, it will do so at its policy meeting right after the November 5 election, which would “boost banks’ lending margins, and should bring some extra reduction in mortgage rates.”
