Mortgage rates at their lowest levels in nearly a year are driving a wave of refinance opportunities for lenders ahead of the Federal Reserve’s expected rate cut next week. The shift is encouraging more borrowers to leave the sidelines, with small rate moves already triggering meaningful activity.
“Refinance businesses increased significantly from the first quarter, but really, year to date, is up 66% from the first half of 2024. And as we know, rates are a little bit better, but not significantly,” Mat Ishbia, president and CEO of United Wholesale Mortgage, said in a video recorded last week. “Refinances are active right now — the first half of 2025 has been significantly better, and we think the second half will be even better than that.”
The number of homeowners who are “in the money” for a refi jumped 55% from two weeks earlier, from 2 million to 3.1 million. That’s according to the September Mortgage Monitor report from ICE Mortgage Technology, released Monday.
The growth comes as Americans continue to face rising costs tied to homeownership. For example, over the past five years, ICE reported that interest costs increased 27%, compared to 23% growth for loan principal, 25% for property taxes and 70% for insurance.
The average 30-year fixed rate for conforming loans, according to ICE, stood at 6.36% on Monday, its lowest level since October 2024.
“The number of mortgages ‘in the money’ for a refinance had been sitting at 2 million since mid-August. That figure jumped to 2.5 million as rates broke below 6.5% on Thursday before hitting 3.1 million on Friday,” said Andy Walden, ICE’s head of mortgage and housing market research.
Analysts at Keefe, Bruyette & Woods (KBW) estimate that 3.7% of the mortgage universe is currently in the money to refinance, assuming a 50 basis-point incentive. If rates fall to 6%, another 17.3% of borrowers could refinance at a lower rate.
The Fed meets on Sept. 17, with market observers overwhelmingly expecting a rate cut. According to the CME Group‘s FedWatch tool, 88% of interest rate traders anticipate a 25-bps cut, while 12% see a 50-bps cut.
Futures suggest mortgage rates may edge down only modestly. ICE projects 30-year fixed rates to average 6.27% by December and 6.2% by February 2026.
“While expectations for Fed rate cuts over the final few months of 2025 remain roughly an even split between two and three cuts, mortgage futures pricing suggest that markets expect only a third of those cuts to make their way downstream into 30-year mortgage rate improvements,” the ICE report stated.
According to Walden, the next significant threshold is 6.25%, which would raise the number of mortgages in the money for a refinance to 3.6 million. But the largest threshold sits at 6.125%, which would put 5 million mortgages in the money for a refinance. That would surpass the levels seen last fall, provided rates were to cross that barrier, he added.
HousingWire Lead Analyst Logan Mohtashami explained that Fed policy remains a key obstacle to rates moving sustainably below 6%.
“In the past two years, the 10-year yield has reached levels of 3.37% and 3.63%. At those levels, we could see mortgage rates drop below 6% today, especially given the favorable spreads currently available. However, during both of those periods, the bond market was anticipating a recession,” Mohtashami wrote.
“The point here is we have been here before with mortgage rates near 6%, but to go lower, we would need a weaker economy or the Fed crying uncle and turning dovish.”
Still, some mortgage experts believe that borrowers shouldn’t wait.
“Homeowners who are waiting for the Fed to cut rates to refinance can act now since investors are already pricing in a September 17 Fed rate cut to lower rates,” said Bill Banfield, chief business officer at Rocket Companies. “Even a modest shift in rates can save homeowners tens of thousands of dollars over the life of a loan, while giving buyers more purchasing power.”