The U.S. mortgage market is experiencing a resurgence not seen in years, as a sharp drop in borrowing costs prompted a wave of refinancing activity ahead of the Federal Reserve’s widely expected interest rate cut—signaling that homeowners aren’t waiting for policy confirmation to lock in savings.
During the week ending Sept. 12, total mortgage application volume jumped 29.7% from the prior week, according to new data from the Mortgage Bankers Association (MBA).
That’s the largest weekly gain since January and the second-sharpest increase since the historic rate collapse during the COVID-19 crisis in March 2020.
Refi Frenzy Breaks Out as Mortgage Rates Fall
The surge coincided with a notable 10 basis point drop in the benchmark 30-year fixed mortgage rate, which fell to 6.39%, the lowest level in nearly a year. Refinancing activity led the wave, with the MBA’s Mortgage Refinance Index skyrocketing 57.7% to 1,596.7, from 1,012.4 the week prior—its highest reading since March 2022.
According to MBA chief economist Mike Fratantoni, this move shows borrowers are moving ahead of monetary policy in anticipation of lower rates.
“Homeowners responded swiftly, with refinance application volume jumping almost 60 percent compared to the prior week,” Fratantoni said.
“Homeowners with larger loans jumped first, as the average loan size on refinances reached its highest level in the 35-year history of our survey,” he added.
Chart: Mortgage Refinance Index Rockets Ahead Of Fed Rate Move
Market Moved Ahead Of The Fed
Fratantoni highlighted that the bond market, which sets long-term mortgage rates, reacted early to the Federal Reserve’s dovish tilt.
Despite the Fed only officially cutting rates by 25 basis points to 4.00%-4.25% on Wednesday, Treasury yields and mortgage rates had already begun their descent.
“Mortgage rates, along with longer-term Treasuries moving in advance of this dovish shift in monetary policy, reached their lowest point for the year last week,” he said.
“If mortgage rates hold at these levels, origination activity will be boosted, both for homeowners who purchased in the last three years and for potential homebuyers.”
Fed Signals More Cuts Ahead
In its updated projections, the Fed signaled two additional cuts in 2025 and another in 2026, while also acknowledging a weaker labor market.
Fratantoni described the policy move as measured, highlighting the Fed’s effort to support employment without triggering panic about economic conditions.
Though the 25-basis-point rate cut was not unanimous—with Trump-appointed Fed Governor Stephen Miran favoring a larger 50-basis-point move—the majority of policymakers supported the gradual approach.
With mortgage rates easing and expectations for further rate cuts building, refinancing could remain strong through year-end.
The combination of rising housing inventory, more favorable borrowing costs, and an improving economic backdrop may also breathe new life into the purchase market, which has struggled under the weight of 20-year high mortgage rates over the past two years.
Market Reactions: Real Estate Stocks Still Stuck
Despite the mortgage surge, real estate stocks have yet to reflect the improving rate environment.
The Real Estate Select Sector SPDR Fund XLRE has fallen for four straight sessions through Wednesday and is up just 3% year-to-date, significantly underperforming the broader market. For comparison, the Vanguard S&P 500 ETF VOO has rallied nearly 12% in the same period.
The residential real estate sector has fared even worse. The Residential REIT ETF HAUS is down 8% year-to-date, while the iShares Residential and Multisector Real Estate ETF REZ is broadly flat.
Investor sentiment toward property stocks remains cautious, with many waiting for tangible signs of rent stabilization, occupancy growth, and more clarity on the Fed’s next moves. But if lower rates persist and the refinance boom lifts housing demand, real estate equities may be poised for a long-overdue rebound.
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