Should you refinance if it's just 0.5% drop?

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In August loan applications reached their highest level since January of 2024. But was that driven by home-buying activity?

Lowering your interest rate for at least 0.5% can be a smart move.

We saw an apparent surge in home loan applications, driven not by home-buying activity but by homeowners rushing to refinance due to falling mortgage rates. The Fannie Mae Refinance Application-Level Index (RALI) showed a 32% weekly rise in refinance applications, with a 94.4% increase year-over-year.

For homeowners with mortgage rates of 7-8%, refinancing to around 6% could offer significant savings. Traditional wisdom suggests that refinancing becomes worthwhile when interest rates drop by at least 0.5%. Lower mortgage rates haven't sparked homebuyer demand, likely due to unchanged housing prices, leaving analysts puzzled.

Location: Los Angeles, CA, USA

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