U.S. mortgage rates declined to their lowest level in nearly a year, prompting more homebuyers and homeowners to apply for loans.
The average interest rate on a 30-year fixed mortgage fell to 6.49% in the week ending Sept. 5, according to the Mortgage Bankers Association (MBA). That is the lowest since October 2024.
The lower rates pushed more borrowers to act. Homeowners rushed to refinance, with applications up 12% from the week before and 34% higher than the same week last year, per the MBA. Buyers also became more active, filing 7% more purchase applications in a week, and 23% higher than a year earlier.
Refinancing made up almost half of all mortgage applications . There was also a rise in demand for adjustable-rate loans, which start with a lower interest rate that can change over time, making them cheaper than fixed-rate mortgages at the beginning.
Joel Kan, an MBA economist, said: “The downward rate movement spurred the strongest week of borrower demand since 2022, with both purchase and refinance applications moving higher.”
The housing market has been weighed down by high borrowing costs and a shortage of affordable homes. But signs of improvement are starting to appear. Price increases have slowed, and the number of homes for sale has reached its highest in several years.
Although falling mortgage rates make for a more attractive housing market for buyers, other living costs are rising which could deter potential future homeowners from buying even with the lower rates.
Inflation data is set to land later this week, likely commanding extra attention this time out. Most economists expect Thursday’s consumer price index to show an uptick, widening the spread between current levels and the Federal Reserve’s 2% target. The prices of services and goods appear to be rising sharply.
Mortgage rates follow changes in U.S. Treasury yields, which dropped after weak job market data. Investors expect the Fed to cut rates at its meeting next week, which could send borrowing costs even lower.
Catherine Arnst contributed to this article