U.S. Home Loan Interest Rates Decline

(Reuters) – The interest rate for the most popular U.S. home loan ticked down to 6.13% last week, the lowest in about two years, and refinancing activity jumped, data from the Mortgage Bankers Association showed on Wednesday.

The average contract rate on a 30-year fixed-rate mortgage dropped 2 basis points in the week ended Sept. 20. This change is smaller than the half-of-a-percentage point policy rate cut delivered by the Federal Reserve last week.

Mortgage rates had been falling for weeks in anticipation of the Fed’s move. They are now down more than three-quarters of a percentage point compared to July, and over 1.75 percentage points from the peak in October 2023.

Applications to refinance existing home loans surged as homeowners benefitted from the decline in home-loan rates in recent months, allowing them to reduce their regular house payments. Refinancing now accounts for more than 57% of all mortgage applications, surpassing the historical median of 48%.