Refinance demand is up 81% from a year ago, thanks to falling mortgage rates
An aerial view of residential houses with several solar panels in Fontana, California on September 17, 2025.
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Mortgage rates fell to their lowest levels in a month last week, pushing more borrowers to refinance. Prospective home buyers, however, were not as enthusiastic.
For loans with a 20% down payment on a 30-year fixed-rate mortgage with a loan balance of $806,500 or less, the average contract interest rate fell to 6.37% from 6.42% last week, down from 0.61 to 0.59 points.
As a result, applications to refinance home loans, which are most sensitive to weekly changes in interest rates, rose 4% for the week and were 81% higher than the same week a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The 30-year fixed rate was 15 basis points higher a year ago.
“The refinance index rose 4 percent, with a 6 percent increase in conventional refinances and a 12 percent increase in FHA refinance applications, as borrowers looked to these opportunities to lower their monthly mortgage payments. VA refinances bucked the trend and fell 12 percent,” Joel Kahn, an MBA, said in an Economist release.
Kahn noted that demand for adjustable-rate mortgages rebounded.
“ARM applications rose 16 percent during the week, bringing ARM’s share to 11 percent, with the ARM rate 80 basis points lower than the 30-year fixed rate,” he added.
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ARM applications generally increase when overall interest rates rise, not when they fall. This speaks more to current high home prices than to growth rates. Buyers are doing everything they can to afford what’s available.
Home mortgage applications fell 5% for the week and were up 20% from the same week a year ago. Buyers are seeing more supply in the market and prices are starting to come down slightly in some areas, but there are those who are waiting, expecting rates to drop further.
And according to a separate survey by Mortgage News Daily, mortgage rates have dropped further to start this week.
“Some lenders are offering their lowest rates in a year, and some for more than 3 years,” wrote Matthew Graham, chief executive of MND, although there was no particular reason for the drop.
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