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With interest rates and mortgage rates on the decline, mortgage refinancing activity has spiked.
According to Optimal Blue’s latest Market Advantage report, there was a 109 percent increase month over month and a 300 percent increase year over year for rate and term refinancing. Refis of all types accounted for 26 percent of loan locks, their highest share since the Federal Reserve began raising its benchmark short-term interest rate in March 2022.
“Borrower demand is rising slowly as mortgage rates have fallen to levels last seen in February 2023,” Mortgage Bankers Association President and CEO Bob Broeksmit said in a statement. “Mortgage applications have now increased in five of the last six weeks, buoyed by a jump in refinance activity. The purchase market is also showing signs of improvement, and MBA expects that to continue as housing supply increases and rates fall farther.”
While rates are on the decline, the amount of money homebuyers are seeking financing for continues to rise. The average loan amount rose from $369,000 to $372,000, while the average purchase price fell from $471,000 to $466,000. In Greater Boston, the average loan amount decreased month-over-month.
In Greater Boston, there was a 115 percent increase in refinances, which made up 28 percent of mortgage lock activity in August. The commonwealth’s biggest metro area also differed from the national picture, with the average loan amount actually decreasing month-over-month.
According to mortgage-buyer Freddie Mac, the average rate on a 30-year, fixed-rate mortgage dropped from 6.73 percent for the seven days ending Aug. 1 to 6.35 percent for the seven days ending Aug. 29.
“Lower rates have incentivized homeowners to refinance both in Boston and nationally, but they haven’t been substantial enough to lift purchase activity,” said Brennan O’Connell, director of data solutions at Optimal Blue. This is likely due to ongoing affordability and inventory challenges. In Boston, the average purchase loan amount fell by $2,400 to $563,762 month-over-month, underscoring ongoing tepid buying activity.”
While interest rates gain a lot of attention, the 10-year Treasury yield also plays a part in mortgage rates. The yield decreased by 18 basis points to 3.91 percent according to Optimal Blue with the spread between the 10-year Treasury and the 30-year conforming mortgage rate narrowing by 13 basis points, to 246 basis points.
