US Refinance Demand Surges 111 Percent Annually as Mortgage Rates Continue Falling

Economists expect more room for lower interest rates as the Federal Reserve eases policy.

Published: 10/29/2025, 2:26:23 PM EDT

US Refinance Demand Surges 111 Percent Annually as Mortgage Rates Continue Falling — A 'For Sale' sign on a house in Monterey Park, Calif., on Sept. 17, 2025. (Frederic J. Brown / AFP)

U.S. homeowners are rushing to contact their mortgage lenders as interest rates declined for the fourth consecutive week, according to new Mortgage Bankers Association data released on Oct. 29.

For the week ended Oct. 24, the average contract interest rate on 30-year fixed-rate mortgages fell to a one-year low of 6.3 percent, from 6.37 percent in the previous week.

Thirty-year mortgage rates have been steadily falling since reaching 7.09 percent in early January.

Average rates for 15-year fixed-rate mortgages also decreased to 5.67 percent from 5.74 percent.

The trend has sparked a surge in refinance demand in recent weeks, with activity rising 9 percent over the past week. In addition, refinance applications have soared 111 percent from a year ago.

“This recent decline in rates spurred the second consecutive week of increased refinance activity, driven mainly by conventional refinance applications,” Joel Kan, deputy chief economist and vice president at the Mortgage Bankers Association, said in a statement.

The average loan size of a refinance application remained elevated at $393,900, Kan noted, adding that “borrowers with larger loan sizes continue to be sensitive to rate movements.”

Refinancing accounted for 57.1 percent of mortgage application activity, up from 55.9 percent in the previous week.

Prospective homebuyers are also taking advantage of lower interest rates.

Home purchase mortgage applications climbed 5 percent, signaling renewed buyer interest. This is also up 20 percent from a year ago.

“Purchase applications increased compared to a holiday-shortened week across most loan types,” Kan said.

The Federal Housing Finance Agency reported on Oct. 28 that the average price of single-family homes with mortgages guaranteed by Fannie Mae and Freddie Mac rose by 0.4 percent in September—the second consecutive monthly increase.

Conversely, the S&P CoreLogic Case-Shiller 20-City Home Price Index fell by 0.6 percent in August, marking the second straight monthly drop and the largest decline since December 2022.

Lower Interest Rates Ahead

Mortgage rates typically track the 10-year U.S. Treasury yield.

Despite tariff-driven volatility in the usually calm government bond market this past spring, yields on Treasury securities have fallen substantially this year.

The 10-year rate reached 4.8 percent on Jan. 13 and has recently slipped below 4 percent.

With the Federal Reserve widely expected to ease monetary policy in the year ahead, there is more room for mortgage rates “to slide further,” says Jeff DerGurahian, head economist and CIO at loanDepot.

The U.S. central bank will complete its two-day meeting of the policy-making Federal Open Market Committee on Oct. 29. The futures market is overwhelmingly penciling in a quarter-point cut to the benchmark federal funds rate—a key borrowing rate that influences business and consumer costs—bringing the new target range to 3.75–4 percent.

Federal Reserve Chairman Jerome Powell talks to reporters following the regular Federal Open Market Committee meetings at the Fed in Washington on July 30, 2025. (Chip Somodevilla/Getty Images) — Federal Reserve Chairman Jerome Powell talks to reporters following the regular Federal Open Market Committee meetings at the Fed in Washington on July 30, 2025. Chip Somodevilla/Getty Images

“If the Fed signals concern over employment, slows quantitative tightening, and upcoming labor data continues to soften, the backdrop for lower rates strengthens,” DerGurahian said in a note emailed to The Epoch Times. “With inflation easing and growth under pressure, the path ahead looks increasingly supportive for lower mortgage rates.”

In addition to interest rates, markets need to pay attention to the dovish transition from quantitative tightening to quantitative easing.

Powell, appearing earlier this month at the National Association of Business Economists, suggested that its three-year balance sheet runoff program could be concluding soon.

“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell said in prepared remarks at the Oct. 14 event. “We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision.”

Quantitative tightening is a monetary policy mechanism that allows bonds to mature, thereby withdrawing liquidity from the financial system. Conversely, quantitative easing injects liquidity into the economy and lowers rates to spur borrowing, investment, and spending.

Comerica Bank, in a note emailed to The Epoch Times, anticipates that the Fed will end the balance sheet runoff in January.

Meanwhile, the Fed will hold its next meeting on Dec. 9–10, and investors overwhelmingly expect another quarter-point rate cut, which would lower the target range to 3.5–3.75 percent.

Still, Fed officials will remain cautious as they grapple with a deteriorating labor market and higher inflation, says Lon Erickson, portfolio manager at Thornburg Investment Management.

“I don’t think we’re ready for a 50 basis-point cut this year like the Fed did when the cutting process first began. The Fed will remain cautious given the balance of risks,” Erickson said in a note emailed to The Epoch Times.

From The Epoch Times