Mortgage rates fall to multi-month low as refinancing surges and ARM activity rises

U.S. borrowers rushed to refinance as mortgage rates fell to the lowest level since October 2024, spurring a sharp jump in refinance activity. The Mortgage Bankers Association said applications to refinance a home loan rose 58 percent in the latest week from the previous week and were 70 percent higher than the same period a year earlier. The average rate on a 30-year fixed-rate mortgage for loans of 806,500 or less declined from 6.49 percent to 6.39 percent.

Refinance demand was led by borrowers with larger loans, a sign that homeowners with sizable balances are seeking relief from higher payments. The ARM share rose to 12.9 percent of total applications, the highest since 2008. Adjustable rate mortgages typically start with lower initial rates and can be about 75 basis points cheaper than 30-year fixed loans, though they carry the risk of future rate adjustments.

Applications to buy a home also ticked up, rising 3 percent for the week and 20 percent from a year earlier, but buyers still faced high prices and elevated rates that have kept many on the fence this summer. Some homeowners have delisted rather than accept lower asking prices.

Mortgage rates began the new week lower in advance of the Federal Reserve's policy meeting. The Fed cut rates for the first time since December 2024, trimming the target range to 4.0 percent to 4.25 percent. While the Fed's decision does not directly set mortgage rates, it tends to influence them. Earlier in the week, Mortgage News Daily reported a 30-year fixed rate of 6.13 percent, the lowest since 2022.

Estimated monthly payments illustrate potential savings from refinancing. For the median-priced home in the United States, about 440,000, the monthly payment on a 30-year loan with a 20 percent down payment would be about 2,140 this week, compared with about 2,295 last October when rates were around 6.8 percent. That difference translates to roughly 1,900 dollars in annual savings. For a 1 million dollar home with the same terms, the annual savings would be nearly 5,000 if refinanced this week versus October last year.

Analysts caution that rates can move again, and the overall housing market remains influenced by supply and pricing. The MBA figures reflect new loan activity and expectations about future payments, so borrowers should check with lenders for precise terms that fit their situations.