FHA refinance demand is surging as current homeowners search for any possible savings in a stubbornly high-rate environment. With mortgage rates on conventional loans showing little movement, loans backed by the Federal Housing Administration—despite requiring mortgage insurance—are emerging as a key alternative.

Total applications to refinance a home loan increased 14% last week compared with the prior week, according to the Mortgage Bankers Association’s seasonally adjusted index. Refinance volume was 88% higher than the same week one year ago, and the refinance share of total mortgage activity climbed to 58.2%, up from 53.0% the previous week.

Driving that increase, FHA refinance demand jumped 24% for the week as the FHA interest rate for 30-year fixed-rate loans dropped to 6.08%, its lowest level since September 2024.

By comparison, the average rate for 30-year fixed-rate mortgages with conforming loan balances of $806,500 or less edged up to 6.33% from 6.32%. Points also increased to 0.60 from 0.58, including the origination fee, for borrowers putting 20% down. Applications to purchase a home slipped 2% for the week, though they remained 19% higher than the same period last year. Prospective buyers, like refinancers, are increasingly turning to FHA loans to reduce upfront and monthly costs.

“Conventional purchase applications were down for the week, but there was a 5% increase in FHA purchase applications as prospective homebuyers continue to seek lower downpayment loans,” said Joel Kan, an economist with the Mortgage Bankers Association.

Mortgage rates on conventional loans rose again at the start of this week, according to a separate survey from Mortgage News Daily. Market participants are now focused on commentary from the Federal Reserve chair following Wednesday’s meeting. While a rate cut is widely expected, the last two such cuts were followed by sharp increases in mortgage rates.

“The cut itself is not the news the market is waiting for,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “Traders are focused on each Fed member’s rate outlook in the quarterly economic projections, along with the press conference, which has often driven the biggest bond market moves.”