Investors and lenders have been anticipating this week’s interest rate cut from the Federal Reserve for a while. So much so that it’s basically already priced into mortgage rates, which have come down in recent weeks. They’re now the lowest they’ve been in about a year.
The average 30-year-fixed is hovering somewhere between 6.1% and 6.4%, depending on which tracker you’re looking at. The drop in rates has sparked a jump in homeowners refinancing, according to the Mortgage Bankers Association.
But it has not motivated nearly as many people to jump back into the market to buy.
At the beginning of 2025, mortgage rates were hovering around 7%. Two years ago they hit almost 8%. Mike Fratantoni, chief economist at the Mortgage Bankers Association, said now that rates are below 6.5%, it might make sense for people who bought at those higher rates to refinance.
“In the past week’s data, a lot of them made the jump. We saw almost a 60% increase in the volume of refinance applications,” he said.
Fratantoni said hundreds of thousands of borrowers now have the option to bring down their mortgage rate — and their monthly payment — by refinancing.
“Just as a rule of thumb, oftentimes a lender will say, if you can save half a percentage point that’s often enough to at least explore the opportunity,” he said.
Right now, many recent homebuyers can save more than that.
So far, though, prospective buyers don’t seem moved by the drop in rates. There was only a 3% jump in mortgage applications from people looking to buy last week, compared to that nearly 60% jump in people looking to refinance.
Danielle Hale, chief economist at Realtor.com said some of it is just timing.
“People who are ready to refinance have probably been thinking about it for a while and have just been waiting for their opportunity,” she said.
It’s also not as big or as complicated of a decision to refinance as it is to buy, she said. There aren’t as many moving parts.
“Buying a home has a longer lead time than the decision to refinance, and so I think we will eventually see some more interest in home buying,” Hale said.
It’s also likely that people who aren’t actively searching for a house aren’t even aware that rates have come down, said Ali Wolf, chief economist at Zonda, a housing data and consultancy firm.
“You’re a journalist. I’m an economist. We study housing. We look at mortgage interest rates all day, every day. The average consumer doesn’t,” she said.
So it can take a little while for people to realize. And once they do, she said, there’s still the issue of home prices, which are near record highs. And the question of whether people feel like it’s a good time to buy.
“A lot of consumers are looking at the economy, and the economy looks shaky, and there’s job instability, and there’s a lot of people that are saying, ‘OK, great, mortgage rates are down, but should I make the largest investment of my life today?’ Maybe not,” Wolf said.
Maybe they want to wait until things look a little more stable.