Homeowners rush to refinance as mortgage rates hit 2025 low

Homeowners rushed to refinance last week and mortgage applications from homebuyers hit their second-highest level of the year as mortgage rates descended to new 2025 lows in anticipation of several Federal Reserve rate cuts^[1] in the months ahead.

The Mortgage Bankers Association’s Weekly Applications Survey showed requests to refinance jumped 58 percent last week compared to the week before and 70 percent from a year ago.

Mike Fratantoni

“Indicative of the weakening job market, and in anticipation of a rate cut from the Federal Reserve, mortgage rates last week dropped to their lowest level since last October, with the 30-year fixed rate declining to 6.39 percent,” MBA Chief Economist Mike Fratantoni said in a statement^[2]. “Almost 60 percent of applications were for refinances, but there was also a pickup in purchase applications.”

At $461,300, the average mortgage refinance application was at its highest level in the 35-year history of the survey, Fratantoni said.

Demand for purchase mortgages near 2025 high

Source: Mortgage Bankers Association Weekly Application Survey^[3].

Requests for purchase mortgages increased for the second week in a row, by a seasonally adjusted 3 percent from the previous week and 20 percent from a year ago. The average purchase loan request was $438,100.

That brought the MBA’s seasonally adjusted purchase loan applications index to 174.0 during the week ending Sept. 12 — the second-highest reading of the year, since the index hit 180.9 during the week ending July 4.

Mortgage rates hit new 2025 low

Rates on 30-year fixed-rate mortgages tracked by Optimal Blue^[4] fell to a new 2025 low of 6.17 percent Tuesday as investors in mortgage-backed securities that fund most home loans priced in expectations for several Federal Reserve rate cuts this year.

With expectations for Fed rate cuts now priced into mortgage rates, further reductions will depend on whether central bank policymakers continue to view deterioration in the job market^[5] as a greater threat to the economy than inflation.

When the Fed cut rates by a full percentage point at the end of last year, mortgage rates moved in the opposite direction^[6] as inflation flared up again. Rates on 30-year fixed-rate mortgages hit a 2025 high of 7.05 percent on Jan. 14.

While borrowers are getting better deals on fixed-rate loans, the MBA survey shows borrowers — particularly those who are refinancing — opting for adjustable-rate mortgage (ARM) loans at the highest rate since 2008.

With ARM loan borrowers temporarily locking in rates that are about 75 basis points, or three-quarters of a percentage point lower than fixed-rate loans, ARM loan applications accounted for 12.9 percent of all loan requests last week.

Borrowers applying for conventional ARM loans were seeking loans averaging $1.13 million, while the average request for government-backed FHA and VA ARM loans was $332,500.

ARM loan borrowers typically pay an introductory rate for five, seven or 10 years, after which their rate is indexed to the secured overnight financing rate^[7] (SOFR) and can move up or down.

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References

1. ^{^} several Federal Reserve rate cuts (www.inman.com)
2. ^{^} statement (www.mba.org)
3. ^{^} Weekly Application Survey (www.mba.org)
4. ^{^} Optimal Blue (www2.optimalblue.com)
5. ^{^} deterioration in the job market (www.inman.com)
6. ^{^} opposite direction (fred.stlouisfed.org)
7. ^{^} secured overnight financing rate (www.newyorkfed.org)
8. ^{^} Mortgage Brief Newsletter (www.inman.com)
9. ^{^} Click here to subscribe. (www.inman.com)
10. ^{^} Email Matt Carter (www.inman.com)