When mortgage rates fell to around 6% in August, homeowners jumped at the opportunity to refinance.
In the months of September and October, more than 300,000 borrowers closed on a refinance, including nearly 150,000 rate and term refinances, per the latest Mortgage Monitor report from ICE.
This pushed refinance volumes to their highest levels in more than two-and-a-half years.
And more than a quarter of October mortgage lending consisted of refinances in a market long dominated by home purchase loans.
Perhaps most interesting, borrowers who refinanced in these months saw some of the biggest rate improvements in decades.
The Average Refinancer Obtained a Mortgage Rate About 120 Basis Points Lower
You’ve probably heard the phrase marry the house, date the rate. But if you haven’t, it was basically an argument to buy a home if you wanted one, and hope to refinance sooner rather than later to get a better rate.
In other words, the home is a keeper, but the mortgage is disposable. This didn’t work out well in early 2022 as mortgage rates nearly tripled from 3% to 8% by late 2023, but it worked out recently.
Per ICE, the average homeowner who applied for a rate and term refinance reduced their mortgage rate by more than a full percentage point in both September (-1.07%) and October (-1.17%).
This resulted in monthly savings of $310 and $320 respectively, which is a pretty compelling reason to refinance.
At the same time, nearly a third of these borrowers were able to reduce their mortgage rate by 1.5% or more, marking one of the best period for rate and term refis in decades.
As you can see in the chart above, the darkest blue shaded portion (that signifies a rate improvement of 1.5%+) jumped in recent months.
And the lighter shade of blue (1-1.49%) also skyrocketed, meaning it was a pretty good time to seek out a lower mortgage rate.
The reason why was because the 30-year fixed seemed to peak at around 8% in October 2023, and then fell nearly two percentage points in less than a year.
That big spread resulted in “some of the largest rate improvements we’ve seen over the past 20 years,” according to ICE.
In fact, this mini refi boom has only really been rivaled by the 2020-2021 refi boom and the low-rate environment seen in 2012/2013.
So despite being short-lived, it was pretty impactful for the borrowers who took part.
Most Refinancers Had Only Held Their Long for About 15 Months
Do you ever think about how long you’ll actually hold onto your mortgage?
It’s an important question to ask yourself because it can determine whether it makes sense to pay mortgage points and/or which home loan type to choose.
After all, why go with a 30-year fixed if you expect to sell or refinance a few short years later? Why not choose an adjustable-rate mortgage such as a 5/6 ARM or 7/6 ARM?
Sure, there’s risk involved if the rate isn’t fixed, and the discounts aren’t always great, but it’s an important consideration to make instead of simply going with the default option.
Anyway, it turns out the average rate and term refinancer only held their original mortgage for 15 months prior to refinancing.
This was the shortest tenure in the nearly 20 years that ICE has been tracking the metric, which tells you folks finally nailed the date the rate strategy.
New Technology Alerts Lenders to Reach Out to Borrowers
While it seemed borrowers were on top of it, you might be able to thank new technology for that too.
Mortgage companies have gotten a lot better at reaching out to potential customers when mortgage rates drop.
There are automated systems that will comb a loan originator’s database daily and if rates hit a certain point, they can send out correspondence to prospective customers.
This might explain why in spite of mortgage rates rebounding higher by late-September, such a large number of borrowers were still able to snag big savings.
Speaking of, roughly $47 million in monthly payment savings were locked in by homeowners in just September and October alone, before rates bounced after the Fed rate cut.
I expect another refi boom to materialize soon if mortgage rates continue on their current downward path.
And chances are both borrowers and originators will be ready to pounce once again.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.