FHA refinance demand is climbing quickly as homeowners search for any financial relief they can find. With conventional mortgage rates stalled, borrowers are increasingly turning to FHA loans, which offer lower rates despite requiring mortgage insurance. According to the Mortgage Bankers Association, total refinance applications rose 14% last week and are now 88% higher than a year ago, showing a major shift toward more affordable refinancing options.
Total refinance activity also increased their share of overall mortgage applications, rising to 58.2% from 53% in just one week. The standout category was FHA refinances, which jumped 24% as the average FHA rate for 30-year fixed loans dropped to 6.08%, the lowest level since September 2024. This decline in rates gave current owners a rare opportunity to reduce monthly payments amid stubbornly high borrowing costs.
In contrast, the average rate for conventional 30-year fixed mortgages with conforming balances rose slightly to 6.33%, with points increasing as well. These higher costs contributed to a 2% weekly decline in purchase mortgage applications, though purchase volume remained 19% higher than the same time last year. Buyers seeking affordability are also shifting toward FHA loans, which require lower down payments.
MBA economist Joel Kan noted that while conventional purchase applications dipped, FHA purchase applications rose 5%, highlighting the growing appeal of government-backed loans. FHA programs continue to offer buyers and owners a meaningful path to savings at a time when conventional loan rates provide little incentive to act.
Mortgage rates for conventional loans climbed again to start the week, according to Mortgage News Daily. Markets now await guidance from the Federal Reserve following Wednesday’s meeting. Although the Fed is widely expected to cut its overnight rate, previous cuts have triggered sharp rises in mortgage rates rather than declines.
As Matthew Graham of Mortgage News Daily explained, the real market mover isn’t the rate cut itself. Traders are watching the Fed’s updated economic projections and listening closely to the Fed Chair’s comments, which often drive significant volatility in the bond market. The reaction to this week’s meeting could determine whether FHA refinance demand continues to build momentum in the weeks ahead.
