There was a dramatic increase in interest rates for 30-year fixed rate refinances and 15-year fixed rate refinances this week. The average 10-year fixed refinancing rate also grew rapidly.
Like mortgage rates, refinance rates fluctuate daily and vary from lender to lender, but also rise and fall over the long term depending on general market conditions and macroeconomic factors. Refinance rates soared 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 slowly start to come down.
The 0.25% rate hike announced Feb. 1 after the Fed’s last meeting is the smallest since March 2022, a sign that the Fed may ease its aggressive rate hikes as inflation declines. Look data on average mortgage rates for the past year, mortgage rates peaked at the end of 2022 and have been on a downward trend ever since. We are still a long way from the record refinance rates of 2020 and 2021, but borrowers could see rates come down in 2023.
“Amid easing inflationary pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow materially,” says Greg McBride, CFA. and Chief Financial Analyst at Bankrate. (Bankrate, like CNET Money, is owned by Red Ventures.) He expects 30-year fixed mortgage rates to end the year near 5.25%.
Regardless of the direction of rates, homeowners shouldn’t focus on timing the market and should instead decide whether refinancing is right for their financial situation. As long as you can get an interest rate lower than your current rate, refinancing will likely save you money. Do the math to see if it makes sense for your current finances and goals. If you decide to refinance, be sure to compare rates, fees, and the annual percentage rate — which indicates the total cost of borrowing — from different lenders to find the best deal.
30-year fixed rate refinancing
For 30-year fixed refinances, the average rate is currently 6.69%, up 31 basis points from what we saw a week ago. (One basis point equals 0.01%.) A 30-year fixed refinance will generally have lower monthly payments than a 10- or 15-year refinance. If you’re currently having trouble making your monthly payments, a 30-year refinance might be a good option for you. In exchange for lower monthly payments, rates for a 30-year refinance will generally be higher than 10- or 15-year refinance rates. You will also repay your loan more slowly.
15-year fixed-rate refinancing
The average 15-year fixed refinance rate is currently at 6.01%, an increase of 43 basis points from what we saw the previous week. Refinancing a 15-year fixed loan from a 30-year fixed loan will likely increase your monthly payment. But you’ll save more money over time because you pay off your loan faster. 15-year refinance rates are generally lower than 30-year refinance rates, which will help you save even more in the long run.
10-year fixed rate refinancing
For 10-year fixed refinances, the average rate is currently 5.96%, an increase of 33 basis points from what we saw the previous week. A 10-year refinance will generally have the highest monthly payment of any refinance term, but the lowest interest rate. A 10-year refinance can help you pay off your home much faster and save on long-term interest. However, you should analyze your budget and your current financial situation to ensure that you will be able to afford the higher monthly payment.
Where are the rates going
At the start of the pandemic, refinancing interest rates hit historic lows. But at the start of 2022, the Fed began raising interest rates in an effort to curb runaway inflation. Although the Fed does not directly set mortgage rates, Fed rate hikes have increased the cost of borrowing for most consumer lending products, including mortgages and refinances. Mortgage rates reached their highest level in 20 years at the end of 2022.
Recent data shows that headline inflation has declined slowly but steadily since peaking in June 2022, but is still well above the Fed’s 2% inflation target. After raising rates by 25 basis points in February, the The Fed said (PDF) It plans to slow — but not stop — the pace of its rate hikes through 2023. Both of these factors are likely to contribute to a gradual decline in mortgage and refinance rates this year, although the consumers shouldn’t expect a sharp decline or a return to pandemic-era lows.
We track refinance rate trends using information collected by Bankrate, which is owned by CNET’s parent company. Here is a table with the average refinance rates provided by lenders across the country:
Average refinancing interest rate
| Product | Rate | A week ago | Change |
|---|---|---|---|
| 30-year fixed refi | 6.69% | 6.38% | +0.31 |
| 15-year fixed refi | 6.01% | 5.58% | +0.43 |
| 10-year fixed refi | 5.96% | 5.63% | +0.33 |
Rates as of February 10, 2023.
How to Shop for Refinance Rates
It is important to understand that fares advertised online often require specific eligibility requirements. Your interest rate will be influenced by market conditions as well as your credit history, financial profile and demand.
Having a high credit score, a low rate of credit utilization, and a history of regular, 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 speak with a mortgage professional to see the specific rates you qualify for. To get the best refinance rates, you must first make your application as strong as possible. The best way to improve your credit rating is to get your finances in order, use your credit responsibly, and monitor your credit regularly. Remember to speak with several lenders and shop around.
Refinancing can be a good decision if you get a good rate or can pay off your loan sooner, but think carefully if it’s the right choice for you right now.
Is it the right time to refinance?
For a refinance to make sense, you’ll generally want to get an interest rate that’s lower than your current rate. Besides interest rates, changing the term of your loan is another reason to refinance. When deciding to refinance, be sure to consider factors other than market interest rates, including how long you plan to stay in your current home, how long your loan is, and the amount of your mortgage. monthly payment. And don’t forget fees and closing costs, which can add up.
As interest rates have risen throughout 2022, the pool of refinance applicants has shrunk. If you bought your home when interest rates were lower than they are today, there may be no financial benefit to refinancing your mortgage.