Economist highlights a level of activity not seen since 2022
The latest data from Fannie Mae has revealed a notable surge in refinance applications as mortgage rates continue to decline.
The Refinance Application-Level Index (RALI), a weekly measure sourced from Fannie Mae’s automated underwriting system, Desktop Underwriter, shows a 32.8% increase in the dollar volume of refinance applications for the week ending August 9, 2024, compared to the previous week. This marks a significant rise of 94.4% year over year.
Mark Palim, Fannie Mae’s deputy chief economist, noted the uptick in refinance activity, linking it to the recent drop in mortgage rates. “With mortgage rates on the decline, refinance activity increased by over 32% last week, as measured by our Refinance Application-Level Index, after rising by 21% in the prior week,” Palim stated. “In fact, last week, total refinance activity hit a level not seen since August 2022, when mortgage rates were closer to 5%.”
Despite the recent surge, Palim emphasized that most borrowers may still require lower rates to be motivated to refinance. “Our data show that as of the end of June, approximately 88% of Fannie Mae single-family mortgage borrowers had a note rate less than 6%, and approximately 81% had a rate below 5%. This indicates to us that, while refi activity is up significantly over the last couple of weeks, most borrowers would need mortgage rates to move much lower before they’re incentivized to refinance.”
Historically, the current rise in refinance activity is significant but still falls short of the highs seen during previous periods. For instance, RALI dollar volume in October 2023 saw a 150.8% increase over the previous five weeks, while during the refinance boom of the third quarter of 2020, RALI dollar volume was down 80.1% compared to today.
The report highlights a four-week average increase of 13.9% in RALI dollar volume, reflecting the sustained momentum in refinance activity as mortgage rates ease.
Fannie Mae will release the next update for the week ending August 16, 2024, on Tuesday, August 20, 2024.
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