For both the 15-year fixed and the 30-year fixed refinance, average interest rates have declined over the past seven days. The average interest rate on a 10-year fixed refinance also declined significantly.
Amid its ongoing fight against inflation, the Federal Reserve announced a 0.25% increase in its target federal funds rate on May 3. Refinance rates, like mortgage rates, fluctuate daily and may see additional movement in response or may remain broadly the same.
“The market has already built in expectations for a 25 basis point hike in May and no more hikes after that,” said Scott Haymore, head of capital markets and mortgage pricing at TD Bank.
With inflation falling steadily from its peak last summer, the Fed has signaled that the end of the current cycle of rate hikes may be in sight. Depending on incoming inflation data, the Fed could keep interest rates where they are – but not cut them – until inflation reaches its 2% target.
“Ultimately, more certainty about the Federal Reserve’s actions will help smooth out some of the volatility we’ve seen in mortgage rates,” said Odette Couchy, deputy chief economist at First American Financial Corporation.
As the Federal Reserve has aggressively raised its federal funds rate in 2022, refinancing rates have jumped, but we are seeing signs that rates may slowly begin to level off as inflation eases.
For the first three meetings of 2023, the Fed has adopted smaller rate hikes – 25 basis points, compared with the 75 and 50 basis point hikes common last year – as it waits to see the cumulative effects of policy changes on inflation .
Looking at average mortgage rate data for the past year, mortgage rates peaked at the end of 2022 and have been declining ever since. We’re still a long way from the record low refinance rates of 2020 and 2021, but borrowers may see rates drop in 2023.
“With inflationary pressures easing, we should see more consistent declines in mortgage rates as the year progresses, especially if the economy and labor market slow significantly,” said 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 where interest rates are headed, homeowners shouldn’t focus on timing the market, but instead should decide if 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. Do the math to see if it makes sense for your current finances and goals. If you decide to refinance, make sure you compare interest rates, fees and the APR – which shows the total cost of the loan – from different lenders to find the best deal.
30-year fixed-rate refinance
The average 30-year fixed refinance rate is currently 7.10%, down 15 basis points from this time last week. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 10- or 15-year refinance. Because of this, a 30-year refinance can be a good idea if you’re having trouble making your monthly payments. However, interest rates on a 30-year refinance will typically be higher than interest rates on a 10- or 15-year refinance. It will also take you longer to pay off your loan.
15-year refinancing with a fixed interest rate
The average 15-year fixed refinance rate is currently 6.49%, down 16 basis points from what we saw seven days ago. A 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan. But you’ll save more money over time because you’re paying off your loan faster. 15-year refinance rates are usually lower than 30-year refinance rates, which will help you save even more in the long run.
10-year fixed rate refinance
For a 10-year fixed refinance, the average interest rate is currently 6.59%, down 17 basis points from a week ago. You’ll pay more each month with a 10-year fixed refinance compared to a 15- or 30-year refinance — but you’ll also have a lower interest rate. A 10-year refinance can help you pay off your house much faster and save on interest. However, you should analyze your budget and current financial situation to make sure you can afford the higher monthly payment.
Where the rates are headed
At the start of the pandemic, refinancing rates hit historic lows. 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 interest rates, the Federal Reserve’s interest rate hikes have led to increased borrowing costs among most consumer credit products, including mortgages and refinances. Mortgage rates hit a 20-year high in late 2022.
The latest data shows that headline inflation has been falling slowly but steadily since peaking in June 2022, but still remains well above the Fed’s 2% inflation target. After raising rates by 25 basis points in March, the Fed indicated (PDF) that it plans to slow — but not stop — the pace of rate hikes in 2023. Both factors are likely to contribute to the gradual withdrawal of interest rates on mortgages and refinancing this year, though consumers shouldn’t expect a sharp decline or a return to pandemic-era lows.
We track trends in refinance rates using information collected by Bankrate. Here’s a table of the average refinance rates reported by lenders across the country:
Average interest rates on refinancing
|Product||Rate it||A week ago||change|
|30 year fixed ref||7.10%||7.25%||-0.15|
|15 year old fixed ref||6.49%||6.65%||-0.16|
|10 year fixed refi||6.59%||6.76%||-0.17|
Rates as of June 5, 2023
How to shop for refinance rates
It is important to understand that rates advertised online often require specific eligibility conditions. Your interest rate will be affected by market conditions as well as your specific credit history, financial profile and application.
Having a high credit score, low loan-to-value ratio, and a history of consistent and on-time payments will usually 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 see the specific interest 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 score is to get your finances in order, use credit responsibly, and monitor your credit regularly. Be sure to talk to multiple lenders and shop around.
Refinancing can be a great move if you get a good interest rate or can pay off your loan early, but consider carefully whether it’s the right choice for you right now.
When should I refinance?
For refinancing to make sense, you usually want to get a lower interest rate than your current interest rate. In addition to interest rates, changing the term of the loan is another reason to refinance. When deciding whether to refinance, be sure to consider factors other than market interest rates, including how long you plan to stay in your current home, the length of the loan term, and the size of your monthly payment. And don’t forget the fees and closing costs that can add up.
As interest rates rise in 2022, the pool of applicants for refinancing has shrunk. If you bought your house when interest rates were lower than they are now, there may be no financial benefit to refinancing your mortgage.