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By Omar Mohammed
Reporter, Economy & Finance
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Falling mortgage rates have homeowners jumping to refinance their homes as they look to reduce their monthly home loans payments, data from lenders showed on Wednesday, while new buyers also looked to secure home loans amid a decline in borrowing costs.
The 30-year fixed mortgage rate declined to 6.54 percent for the week ending August 9, while the 15-year rate also fell to a little under 6 percent, according to data from the Mortgage Bankers Association (MBA). That decline in borrowing costs for home loans has sparked a 35 percent refinancing activity from the prior week and was 118 percent higher than at the same time a year ago. Overall, mortgage applications soared nearly 17 percent, MBA revealed.
"Rates on both 30- and 15-year fixed rate mortgages decreased for the second consecutive week, and combined with the previous week's rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance," Joel Kan, MBA's deputy chief economist, said in a statement shared with *Newsweek. "*The refinance index also saw its strongest week since May 2022."
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The surge in refinancing was driven by gains in restructured conventional mortgages, Federal Housing Administration and Veterans Affairs home loans, according to MBA. The share of refinancing activity jumped to nearly 49 percent of overall mortgage applications up from close to 42 percent in the prior week.
New home loan applications also went up, suggesting an improvement of activity in the housing market.
"Purchase applications increased by 3 percent, with small gains seen across the various loan types, indicating that prospective homebuyers are slowly reentering the market," Kan said.
Improving activity in the mortgage market comes at a time when analysts expect the Federal Reserve to institute its first rate cut in September after it aggressively hiked since early 2022, a move that contributed to a jump in borrowing costs across the economy, including for home loans.
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On Wednesday, the Consumer Price Index came in at under 3 percent for the first time in over three years. Soaring inflation had sparked the move by policymakers to raise rates. A cooling of the rate of price increases could convince the Fed that it was time to ease financial conditions which could lead to a fall in mortgage rates.
"The improvements in inflation have become more broad-based than they were last year, which suggests the cooling we are seeing has legs," Diane Swonk, KPMG's chief economist, said in a note shared with Newsweek. "This is what the Fed is looking for."
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