Homeowners are rushing to refinance their mortgages after rates finally dropped

The standard 30-year fixed-rate mortgage averaged 6.49% this week, slightly up from the previous week. Despite this increase, homeowners continue to refinance due to the relatively low rates. Mortgage applications surged by 17% last week, with a significant 35% increase from homeowners seeking to refinance. Mortgage rates reached their lowest level in over a year. It is anticipated that borrowing costs will decrease further if the Federal Reserve carries out expected interest rate cuts later this year. However, housing affordability still poses challenges, especially for low-income individuals in cities with high home-price growth. The shortage of available housing units continues to drive up home prices, and despite some improvement in housing inventory, demand still exceeds supply. Housing costs have affected the Federal Reserve’s inflation fight, with shelter costs being the primary driver of the recent increase in consumer prices. The Fed is expected to lower its benchmark lending rate in September, providing some relief from high borrowing costs. Bond yields, influenced by the Fed’s actions, impact mortgage rates. It is uncertain whether mortgage rates will fall below 6% this year, but they still remain higher than pre-2022 levels when interest rates began to rise.