Mortgage refinancing activity surged in September, marking the largest monthly increase since COVID-era ultra-low interest rates. This increase followed mortgage rates dropping below 6.5% for the first time since October 2024 in anticipation of the Federal Reserve’s eventual rate cuts.

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of total mortgage application volume, rose 29.7% from August on a seasonally adjusted basis and was 29.6% higher than a year ago, the sharpest monthly gain since 2020.

The average contract interest rate for 30-year fixed mortgages fell 27 basis points to 6.42%, the lowest in one year. Amid lower borrowing costs, home owners seized the opportunity to refinance, driving a 54.2% increase in refinancing activity. Purchase applications also increased 7.7% month-over-month. Compared to a year ago, purchase and refinance applications were up 18.6% and 39.8%, respectively.

More details are available in this Eye on Housing post.