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Refinance demand is 81% higher than it was a year ago, thanks to falling mortgage rates
An aerial view of residential homes, many with solar panels, on Sept. 17, 2025 in Fontana, California.
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Mortgage rates last week dropped to the lowest level in a month, pushing more borrowers to refinance. Potential homebuyers, however, were not as enthused.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased last week to 6.37% from 6.42%, with points decreasing to 0.59 from 0.61, including the origination fee, for loans with a 20% down payment.
As a result, applications to refinance a home loan, which are most sensitive to weekly changes in interest rates, rose 4% for the week and were 81% higher than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The rate on the 30-year fixed was 15 basis points higher a year ago.
“The refinance index increased 4 percent, driven by a 6 percent increase in conventional refinances and a 12 percent increase in FHA refinance applications, as borrowers remain attentive to these opportunities to lower their monthly mortgage payment. VA refinances bucked the trend and were down 12 percent,” said Joel Kan, an MBA economist in a release.
Kan noted that demand for adjustable-rate mortgages rose again.
“ARM applications increased 16 percent over the week, which pushed the ARM share to 11 percent, with the ARM rate more than 80 basis points lower than the 30-year fixed rate,” he added.
ARM applications usually rise when overall interest rates rise, not when they fall. This increase speaks more to currently high home prices than it does to rates. Buyers are doing everything then can to afford what’s available.
Applications for a mortgage to purchase a home dropped 5% for the week and were 20% higher than the same week one year ago. Buyers are finding more supply on the market, and prices are starting to soften slightly in some areas, but there are those who are waiting, expecting rates to come down even further.
And mortgage rates did come down even more to start this week, according to a separate survey from Mortgage News Daily.
“Some lenders are offering their lowest rates in over a year, and some in over 3 years,” wrote Matthew Graham, chief operating officer at MND, although there was no particular reason for the drop.
