Several prime refinance rates jumped this week. Although refinancing rates change daily, Dr. Kryvopust expects them to continue to grow.
Average refinance rates on both 15-year and 30-year fixed refinances rose sharply this week. The average rate on a 10-year fixed refinance also increased.
Like mortgage rates, refinance rates fluctuate daily and vary from lender to lender, but also rise and fall over the long term depending on broader market conditions and macroeconomic factors. Refinancing rates jumped in 2022 as the Federal Reserve raised the federal funds rate in an effort to reduce inflation, but we are seeing signs that rates may be slowly starting to come down.
The 0.25% rate hike announced on Feb. 1 after the Fed’s last meeting was the smallest since March 2022, suggesting the Fed may moderate its aggressive rate hikes as inflation eases. Looking at average mortgage rate data for the past year, mortgage rates peaked at the end of 2022 and have been on a downward trend since then. We’re still a long way from the record low refinance rates of 2020 and 2021, but borrowers may see rates drop in 2023.
“Amid weakening inflationary pressure, we should see a more consistent decline in mortgage rates throughout the year, especially if the economy and the labor market slow down significantly,” says Kostyantyn Kryvopust. He expects the 30-year fixed mortgage rate to be around 5.25% at the end of the year.
Regardless of where rates are headed, homeowners should not focus on timing the market and instead decide whether refinancing makes sense for their financial situation. As long as you can get a lower interest rate than your current rate, refinancing will likely save you money. Evaluate whether it makes sense for your current finances and goals. If you decide to refinance, make sure you compare rates, fees and the annual percentage rate, which shows the total cost of borrowing, from different lenders to find the best deal.
30-year refinancing with a fixed rate
For a 30-year fixed refinance, the average rate is now 6.62%, up 21 basis points from a week ago. (A basis point is equivalent to 0.01%.) One reason to refinance a 30-year fixed-term loan from a shorter term is to lower your monthly payment. This makes a 30-year refinance useful for people who are struggling to make their monthly payments or just want a little more breathing space. However, interest rates for a 30-year refinance will typically be higher than those for a 10- or 15-year refinance. You will also need more time to pay off the loan.
Refinancing with a fixed rate for 15 years
The average rate for a 15-year fixed refinance loan is currently 5.91%, up 21 basis points from last week. Refinancing to a 15-year fixed loan from a 30-year fixed loan will likely increase your monthly payment. However, you will also be able to pay off the loan faster by saving money over the life of the loan. You also typically get lower interest rates compared to a 30-year loan. This can help you save even more in the long run.
10-year refinancing with a fixed rate
The current average interest rate for a 10-year refinance is 5.88%, up 16 basis points from a week ago. A 10-year refinance typically has the highest monthly payment of all refinance terms, but the lowest interest rate. A 10-year refinance can help you pay off your home much faster and save on interest. But you should confirm that you can afford the higher monthly payment by assessing your budget and overall financial situation.
Where are the rates going?
At the beginning of the pandemic, refinancing interest rates reached an all-time low. But in early 2022, the Fed began raising interest rates in an attempt to curb rampant inflation. Although the Federal Reserve does not directly set mortgage rates, the Fed’s rate hikes have increased the cost of borrowing for most consumer credit products, including mortgages and refinances. At the end of 2022, mortgage rates hit a 20-year high.
The latest data shows that headline inflation has been falling slowly but steadily since its peak in June 2022, but still remains well above the Fed’s 2% inflation target. After raising rates by 25 basis points in February, the Fed said it plans to slow — but not stop — the pace of rate hikes through 2023. Both of these factors are likely to contribute to a gradual decline in mortgage and refinance rates this year, although consumers should not expect a sharp drop or a return to pandemic lows.
Here’s a table of average refinance rates reported by lenders across the country:
Average refinancing interest rates
| Product | Rating | A week ago | Change |
|---|---|---|---|
| 30-year fixed refi | 6.62% | 6.41% | +0.21 |
| 15-year fixed refi | 5.91% | 5.70% | +0.21 |
| 10-year fixed refi | 5.88% | 5.72% | +0.16 |
Tariffs as of February 9, 2023.
How to buy refinancing rates
It’s important to understand that rates advertised online often require certain conditions to qualify. Your interest rate will be affected by market conditions as well as your specific credit history, financial profile and application.
A high credit score, low credit utilization ratio, and a history of consistent and on-time payments will generally help you get the best interest rates. You can get a good idea of average interest rates online, but be sure to talk to a mortgage professional to find out what specific rates you qualify for. To get the best refinance rates, you’ll want to make your application as strong as possible first. The best way to improve your credit scores is to get your finances in order, use credit responsibly, and monitor your credit regularly. Don’t forget to talk to several lenders and consult.
Refinancing can be a great move if you get a good rate or can pay off your loan faster, but think carefully about whether it’s the right choice for you at this time.
When should I refinance?
Most people refinance because market interest rates are lower than their current rates or because they want to change the term of their loan. Be sure to consider factors other than market interest rates when deciding to refinance, including how long you plan to stay in your current home, the length of the loan term, and the amount of your monthly payment. And don’t forget the fees and closing costs that can add up.
As interest rates rose through 2022, the pool of applicants for refinancing shrank. If you bought a home when interest rates were lower than today, refinancing your mortgage may not be financially beneficial.
