Refinancing Surges Amid Falling Interest Rates

Female client talking with financial advisor in bank.

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Demand for refinancing mortgages bounced back from a slump last week, with the volume of applications jumping more than in any week since January amid falling borrowing costs.

The Mortgage Bankers Association’s refinancing index, a measure of refinancing applications, rose 20% from the previous week, reaching its highest point since May, weekly data from the group showed Wednesday. Just the week before, volume was the smallest since January 2020, before the pandemic triggered a burst of homebuying interest and lower interest rates.

Borrowers looking to buy homes, and especially to refinance, were quick to take advantage of interest rates on 30-year fixed mortgages that averaged 3.09% last week. That’s the lowest average, as measured by MBA, since February, and not all that far off from the record low of 2.85% hit in December.

Mortgage rates typically track the yields on 10-year Treasury bonds, which are sensitive to inflation concerns. Investor worries over reduced economic growth and the variant-driven spread of COVID-19 are keeping those Treasury yields relatively low after concerns about rising inflation sent them higher earlier in the year, economists say.

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