Americans Rush to Refinance Homes as Mortgage Rates Drop

American homeowners are jumping to refinance their mortgages after a drop in rates from their peak in the fall, according to the Mortgage Bankers Association (MBA), giving them the opportunity to cut their monthly payments towards their home loans.

The holiday-adjusted Refinance Index from the MBA saw activity in that space go up by 19 percent from the week before and a 30 percent jump from a year ago, lenders said.

Mortgage rates ticked up slightly for the week ending January 5 to 6.81 percent but this was lower from their record two-decade high of 8 percent in October.

“2024 started strong, with gains in both refinance and home purchase applications leading to a 10 percent jump in overall activity for the week,” Bob Broeksmit, MBA’s president and CEO, told Newsweek in a statement. “With rates expected to remain below 7 percent for the foreseeable future, MBA anticipates renewed activity in the housing market heading into the spring, especially if housing supply continues to rise.”

Experts have noted that the decline in rates has cut down on what monthly mortgage payments buyers and homeowners can expect to pay on their home loans.

The median housing payment was down $325 per month for the week ending January 7, at a time when rates had hit 6.62 percent, nearing the lowest level in almost a year, according to real-estate platform Redfin.

Redfin said on Thursday that its agents were reporting increased activity in their markets buoyed by the rate declines seen over the past month. There are more listings and prospective buyers are showing up more for open houses amid increased applications for home loans.

“More buyers are out there touring this week; they feel optimistic now that rates have come down a bit,” Phoenix Redfin Premier agent Heather Mahmood-Corley said in a statement.

Analysts say prices have stabilized even as they stay elevated. Median sale price at a little more than $363,000 was more than 4 percent higher for the year, while the asking price has gone up by nearly 5 percent, Redfin data showed.

The decline in rates from their 8 percent peak has helped buyers pierce through a psychological barrier even as the price of a home remains high, realtor.com chief economist Danielle Hale told Newsweek this week.

“They’ve been in this holding pattern for the better part of the last year and that means today’s buyers, who are benefiting from lower rates, are essentially getting about the same price when they’re out shopping now,” Hale said.