Mortgage refinancing surges nearly 20% in one week, MBA says

• Mortgage refinancing activity surged 20% in the last week, MBA said.
• The pick up in refinancing volume comes as some lenders are quoting rates below 7%.

Mortgage rates have dropped to their lowest level since July, and borrowers are rushing to lock in a lower rate than what they secured earlier in the year.

Refinancing activity in the last week has swung up by nearly 20%, according to the Mortgage Bankers Association.

"Borrowers who had seen rates near 8 percent earlier this fall are now seeing some lenders quote rates below 7 percent," Mike Fratantoni, MBA's SVP and Chief Economist said in the release. "Refinance volume picked up in response to this drop in rates, with a particularly notable increase for FHA and VA refinance applications."

The 30-year mortgage rate is currently perched at 7.03% as per Freddie Mac, down from 7.22% a week ago.

As the rate on the most popular US home loan slips, homeowners are taking advantage and looking to get some relief from the sky-high rates they had to deal with when they were in the market earlier this year. Mortgage refinancing as a share of all mortgage activity tracked by the MBA increased to 39.2% of total applications from 34.7% the previous week.

While mortgage rates have seen a sharp decline since interest rates snapped back from recent multi-year highs, they're still much higher than they were in the years of the pandemic, when some borrowers were able to lock in rates below 3%. The drop in rates may have fueled a refi boom but it hasn't done much to draw new buyers to the market yet.

"Purchase volume was running about 18 percent below last year's pace, as prospective homebuyers are still challenged by a lack of inventory, even as rates have decreased," MBA's Fratantoni said.

The housing market has seen a tough year with rising home prices and a severe supply crunch. And with mortgage rates so high, many current owners have opted to stay put rather than give up lower rates they locked in before this year.

As those pressures begin to abate, the market is slowly thawing. According to Zillow's forecast for 2024, home-buying costs are poised to level off and transaction volume will pick up as people give up trying to time a drop in mortgage rates.