Key Takeaways
- A measure of the volume of mortgage refinancing rose 14% last week from the week before after mortgage rates fell, continuing to drop from the 23-year highs they hit in late October.
- While refinancing is still unpopular by historic standards, the uptick could signal a reversal of the post-pandemic slump.
- Refinancing boomed during the pandemic when interest rates hit all-time lows, and fell into the doldrums after rates rose, making it much less advantageous.
A drop in mortgage rates last week convinced some homeowners that it was a good time to refinance their home loans, possibly indicating that refinancing has hit bottom.
An index measuring refinance activity rose 14% last week from the previous week, hitting its highest point since early October, the Mortgage Bankers Association said Wednesday. The jump in refinancing was a reaction to a drop in the average rate offered for a 30-year mortgage to 7.17% from 7.37% the week before, and from its recent peak of 7.90%, hit in late October.
With mortgage rates falling from their 23-year highs, refinancing may have nowhere to go but up from its post-pandemic slump, as the chart below shows.
“The overall level of refinance applications is still very low, but recent increases could signal that 2023 was the low point in this cycle for refinance activity,” Joel Kan, deputy chief economist at the MBA, said in a prepared statement.
Refinancing allows homeowners to secure a new rate on a home loan, either lowering their monthly mortgage payments or getting cash. Given that refinancing is most advantageous when rates are low, there was a frenzy of refinancing when mortgage rates hit record lows in late 2020 and early 2021.
Refinancing fell off rapidly in 2022 when mortgage rates surged because of the Federal Reserve’s campaign of anti-inflation rate hikes.
Those mortgage rates have been falling in recent weeks, however, due to growing expectations among financial market traders that the Fed is close to victory in its battle against inflation and will soon begin to lower its influential fed funds rate from its current 22-year high.
Do you have a news tip for Investopedia reporters? Please email us at
