Housing News

Homeowners Race to Refinance as Mortgage Rates Come Down

Homeowners rushed to refinance their loans in July as mortgage rates fell to their lowest levels in more than a year.

The share of mortgage refinances rose nearly 5% year-over-year in July, according to real estate data firm Optimal Blue's July 2024 Market Advantage report. This was the highest amount of refinancing activity since September 2022.

Right around the beginning of July, rates started to drop, eventually falling well below where they'd been for more than a year.

The average rate for a 30-year fixed-rate loan was 6.95% in the week ending July 3rd. Since then, rates have fallen steadily. But the big drop-off had as the calendar flipped to August.

Mortgage rates slid down from an average of 6.73% for 30-year, fixed-rate loans in the week ending Aug. 1 to 6.47% in the week ending Aug. 8, according to Freddie Mac data. That's nearly a third of a percentage point.

Rates have stayed that low since then, as the average rate for a 30-year loan was 6.49% for the week ending Aug. 18.

"We're seeing more homeowners refinancing their mortgages because interest rates have gone down," said Brennan O'Connell, director of data solutions at Optimal Blue. "If current mortgage rates are lower than the rate on your existing loan, refinancing can reduce the interest you pay each month. Even a small decrease in the interest rate can lead to significant savings over time."

More homebuyers and homeowners also locked in lower rates for future purchases and refinances, according to Optimal Blue.

That may have been a smart move as mortgage rates ticked up and then down and were generally volatile over the last few days, according to Mortgage News Daily.

Even with the lower rates, the average loan amount dropped from $374,000 in June to $369,000 in July, according to Optimal Blue.

Los Angeles had the largest percentage of refinances, making up 28% of all mortgage activity, according to Optimal Blue. The other loans were made by buyers purchasing homes. (Optimal Blue only looked at the largest 20 metropolitan areas.)

The City of Angels was followed by Miami, at 23%, and Atlanta, at 20%.

"A [traditional] refinance can be a good option for homeowners who want to take advantage of lower rates to reduce their monthly mortgage payments and free up cash for other expenses or savings," said O'Connell. "A cash-out refinance can give homeowners access to funds for home improvements, paying down debt, or other financial goals."