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Last week, the Mortgage Bankers Association reported another increase in its weekly refi index, as refinancing continues to slowly gain traction. Given that the average 30-year fixed-mortgage rate, as tracked by Mortgage News Daily, has dropped from this year’s high of 7.52% in April to 6.25% as of September 25, some borrowers who secured 7.0% to 8.0% rates over the past 24 months are taking advantage of the recent rate dip for relief.
Here’s how the Mortgage Refinance Index reading for the third week of September compares to that of previous years.
2018: 947
2019: 1,928
2020: 3,580
2021: 3,391
2022: 588
2023: 415
2024: 1,133
The recent refinancing jump raises the question: How much room does refi, given current mortgage rates, actually have to climb?
Given that 76% of outstanding mortgage borrowers have an interest rate below 5.0%, the pool of potential traditional refis will likely have a lower ceiling this cycle. (Many experts across the industry agree, some suggesting instead that home equity loans could see a resurgence.)
To obtain a more precise estimate of potential refinancing activity, ResiClub reached out to Intercontinental Exchange.
Intercontinental Exchange—a financial services giant that owns the New York Stock Exchange and in 2023 completed its purchase of housing finance giant Black Knight for $11.9 billion—has a proprietary calculation to estimate how many mortgage borrowers, based on their underlying rates and current rates, are “in the money” for a potential refinance.
To be “in the money,” a mortgage borrower’s current interest rate must be at least 0.75 percentage points (75 basis points) above the 30-year fixed-mortgage rate.
Back in July 2021, when the average 30-year fixed-mortgage rate was 2.80%, 25.2 million mortgage borrowers were “in the money” for a refi. By June 2024, when the average 30-year fixed-mortgage rate was 6.87%, that number was just 1.3 million.
As of September 17, 2024, when the average 30-year fixed-mortgage rate was 6.07%, that number was up to 4.2 million.
Big picture: The recent dip in mortgage rates has unlocked some potential refinances, helping to lift refis off their ultralow levels over the past two years. However, as of September 2024, the total number isn’t substantial—especially compared to past refinance booms.
Over the coming year, most mortgage rate forecasters expect a slight drop in mortgage rates.
Here’s the forecast for the average 30-year fixed-mortgage rate in Q4 2025:
Mortgage Bankers Association: 5.80%
Fannie Mae: 5.70%
Wells Fargo: 5.55%
Moody’s/Mark Zandi: 5.50%
If these forecasts are directionally correct, it could unlock some more potential refis.