Falling rates spark a wave of offers
Refinancing is making a comeback in the US housing market, with mortgage refinance offers jumping nearly 42% over the past year, according to a new LendingTree report.
Average annual percentage rates (APRs) on refinances dropped from 8.19% in September 2023 to 6.63% in September 2024, translating to monthly savings of about $136 for homeowners who have refinanced.
Interest rates for 30-year fixed-rate refinances dropped from an average of 8.19% to 6.63% over the year, making monthly payments more affordable and renewing interest in refinancing across the country. On average, homeowners who refinance are now saving $136 a month, even as loan amounts have increased by over $16,000.
“Owing to this dramatic rise, demand for mortgage refinancing declined sharply, cratering from its highest level in around a decade to a more than 20-year low,” LendingTree senior economist Jacob Channel wrote in the report. “However, that’s rapidly changing. Inflation has cooled, the Federal Reserve has begun making cuts to its benchmark rate, and average mortgage rates have fallen by dozens of basis points from their 2024 highs.
“This has put refinancing back on the radar for many US homeowners.”
Interest in refinancing has spiked across the country, but the increase has been even more pronounced in certain states.
West Virginia led the pack with a 235.69% year-over-year spike in the number of mortgage refinance offers, followed by Connecticut at 144.34% and Oklahoma at 141.77%.
Refinancing interest has more than doubled in 10 states, including Illinois, Iowa, and Maryland, reflecting a wide geographic range of homeowners hoping to lower their mortgage payments as rates ease.
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While the rate drop has sparked renewed interest, LendingTree noted that not all homeowners stand to gain from refinancing.
Many borrowers secured rates below 4% during the pandemic, making today’s 6% average rate less attractive by comparison. For these homeowners, refinancing could lead to higher payments rather than savings.
“Even though average rates have dropped by dozens of basis points from their 2024 highs, the average rate on a new 30-year, fixed-rate mortgage is still more than 6.00%,” Channel explained. “While mortgage rates are declining, they’re still a far cry from where they were during the height of the pandemic when most mortgage borrowers either refinanced or bought a new home.”
The report also noted that closing costs and qualification requirements continue to be barriers, particularly for homeowners with lower credit scores or high debt.
“If mortgage rates continue their downward trend over the next six to 12 months, refinancing will likely remain a hot topic. While many people will be able to take advantage of falling rates and make their mortgages more affordable by refinancing, many won’t. We shouldn’t expect refinancing to become anywhere near as popular as it was just a few short years ago when mortgage rates were at record lows,” Channel added.
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