Mortgage Rates Dip Below 6.3%, Fueling Refinance surge
WASHINGTON, D.C. – Homeowners and prospective buyers are finding renewed optimism in the housing market as mortgage interest rates continue their downward trend. Rates for 30-year, fixed-rate loans averaged 6.26% in the week ending Sept. 18, according to Freddie Mac data, a decrease from 6.35% the previous week.While still higher than the 6.09% average from a year ago, the decline offers much-needed financial relief to those looking to refinance or enter the market.
The recent drop is linked to anticipation and the subsequent action of the U.S. Federal Reserve’s meeting on Sept. 17, where the Fed lowered its benchmark interest rate by a quarter of a percentage point - the first rate cut of 2025. Though separate from mortgage rates, the Fed’s short-term rate adjustments typically influence mortgage rate direction.
The impact of falling rates is already being felt. Mortgage applications jumped 29.7% in the week ending Sept.12, compared to the prior week, according to the Mortgage Bankers Association. A meaningful portion of this increase was driven by homeowners seeking to refinance existing loans, with refinance applications surging nearly 60% over the same period.
“Mortgage rates decreased yet again this week, prompting many homeowners to refinance,” stated Freddie Mac Chief Economist Sam Khater.
The potential savings from refinancing are substantial. A homeowner who secured a mortgage in October 2023, when rates hovered around 8%, could save approximately $400 per month by refinancing to a 6.25% rate. This translates to nearly $5,000 in annual interest savings and a total of $146,000 over the life of a 30-year,fixed-rate loan (based on a 20% down payment on a median-priced home of $429,900).
Falling rates also expand purchasing power for homebuyers.individuals earning $100,000 annually may now be able to afford a home costing $47,000 more with rates falling from 8% to 6.25%.
Despite the positive trend, affordability remains a key challenge. “Affordability is still the major constraint keeping many would-be homebuyers on the sidelines,” noted Luminous MLS Chief Economist Lisa Sturtevant. “The recent drop in mortgage rates is a positive development for helping to ease the affordability challenge.”
