The news: Falling mortgage rates have reignited refinancing activity, particularly among borrowers with recently originated loans. Refinance volume rose 88% YoY, per Mortgage Bankers Association data from earlier this month.

The incentive for borrowers to refinance continues to grow: Last Wednesday, the Federal Reserve cut the target federal funds range to 3.5%-3.75%, which is down from the recent peak of over 5% in 2023 and 2024.

Trendspotting: Many aspiring homeowners have been priced out of the market, and current homeowners locked into low rates are hesitant to sell, according to our March 2025 report US Home Lending Trends 2025. Mortgage rates have hovered between 6% and 7% after a jump in 2022. In that environment, nonbank lenders have competed intensely with traditional lenders.

Some nonbank lenders have invested heavily in digital services. Rocket Mortgage bought the online real-estate search and brokerage company Redfin earlier this year in a deal worth $1.75 billion, consolidating Redfin’s search capabilities and agent network into Rocket’s loan funnel. And digital mortgage provider Lovato announced in May that it would acquire Redfin competitor Movoto with a similar intent.

Our take: Traditional lenders should take a similar tack with enhancing the digital mortgage experience and focus on retaining existing mortgage customers as falling rates tempt them to refinance with competitors.

The combination of personalized advice and a better digital experience could keep customers within a bank’s ecosystem. Banks can reach out proactively to customers who will benefit from the newly lower rates and offer perks like refinancing and personalized loan modifications.