In the run-up to the Fed meeting in May, the average 30-year fixed rate refinancing rate fell, while the 15-year fixed rate refinancing rate rose. At the same time, average fixed 10-year refinancing rates have shrunk.
Amid its ongoing battle to battle inflation, the Federal Reserve announced a 0.25% increase in its target Fed rate on May 3. Refinance rates, which, like mortgage rates, fluctuate on a daily basis, and could see more movement in response, or they could generally stay the same.
“The market had really built up expectations for a 25 basis point hike in May and then no more hikes after that,” said Scott Highmore, head of capital markets and mortgage pricing at TD Bank.
With inflation steadily declining from its peak last summer, the Federal Reserve has signaled that the end of the current rate hike cycle may be imminent. Depending on incoming inflation data, the Fed may keep rates where they are – but not cut them – until inflation reaches its 2% target.
“Ultimately, more certainty about the Fed’s actions will help mitigate some of the volatility we’ve seen with mortgage rates,” says Odita Kushi, deputy chief economist at First American Financial Corporation.
With the Fed raising the federal funds rate in 2022, refinancing rates have gone up, but we’re seeing signs that rates may start to slowly rise as inflation drops.
For the first three meetings of 2023, the Fed has adopted smaller rate increases — 25 basis points compared to the 75 and 50 basis point increases common last year — as it waits to see the cumulative effects of policy changes on inflation.
Looking at last year’s average mortgage rate data, mortgage rates peaked in late 2022 and have been trending lower since then. We’re still a long way from record low refinancing rates for 2020 and 2021, but borrowers could see lower interest rates in 2023.
“With the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, especially if the economy and labor market slow significantly,” says Greg McBride, CFA and Chief Financial Analyst at Bankrate. (The bank, like CNET Money, is owned by Red Ventures.) It expects 30-year fixed mortgage rates to end the year near 5.25%.
No matter where prices are headed, homeowners should not focus on market timing and should instead decide whether refinancing makes sense for their financial situation. As long as you can get an interest rate that is lower than the current rate, refinancing is likely to 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 shows the total cost of borrowing — from different lenders to find the best deal.
Fixed rate refinancing for 30 years
The average rate for a 30-year fixed refinance loan is currently 6.93%, down 7 basis points compared to a week ago. (A basis point equals 0.01%.) Refinancing a 30-year fixed-term loan for a shorter one can lower your monthly payments. For this reason, a 30-year refinance can be a good idea if you’re having trouble making your monthly payments. Be aware, however, that interest rates will usually be higher compared to a 10- or 15-year refinance, and you’ll pay off your loan at a slower rate.
Fixed rate refinancing for 15 years
For fixed 15-year refinancings, the average rate is currently 6.24%, up 1 basis point from what we saw in the previous week. A 15-year hard refinancing is more likely to increase your monthly payment than a 30-year loan. On the one hand, you will save money on interest, because you will pay off the loan sooner. Interest rates on 15-year refinancing also tend to be lower than those for 30-year refinances, so you’ll save more in the long run.
Fixed rate refinancing for 10 years
For fixed 10-year refinancings, the average rate is currently 6.29%, down 6 basis points from a week ago. Compared to a 15 or 30 year refinance, a 10 year refinance usually has a lower interest rate but higher monthly payments. Refinancing for 10 years can help you make your home payments faster and save interest. Just be sure to look carefully at your budget and current financial situation to make sure you can afford higher monthly payments.
Where rates are headed
At the start of the pandemic, refinancing rates hit a historic low. But in early 2022, the Fed began raising interest rates in an effort to curb runaway inflation. While the Fed does not directly set mortgage rates, the increase in federal interest rates has increased the cost of borrowing among most consumer loan products, including mortgages and refinancing. Mortgage rates hit a 20-year high in late 2022.
Recent data shows that headline inflation has been declining slowly but steadily since it peaked in June 2022, but it is still well above the 2% inflation target set by the Fed. After raising interest rates by 25 basis points in March, the Fed indicated (PDF) that it plans to slow – but not stop – the pace of rate hikes throughout 2023. These two factors are likely to contribute to a gradual pull-down of post-mortgage rates and re-pricing. financing this year, though consumers shouldn’t expect a sharp decline or a return to pandemic-era lows.
We track refinance rate trends using information collected by Bankrate. Below is a table of average refinancing rates reported by lenders across the United States:
Average interest rates on refinancing
| project | an average | Since a week | changes |
|---|---|---|---|
| Stable reference for 30 years | 6.93% | 7.00% | -0.07 |
| Stable reference for 15 years | 6.24% | 6.23% | +0.01 |
| 10 years stable reference | 6.29% | 6.35% | -0.06 |
Prices as of May 4, 2023.
How to find the best refinance rate
It is important to understand that rates advertised online often have specific eligibility requirements. 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 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 feel for average interest rates online, but be sure to speak with a mortgage professional to find out what specific rates you qualify for. To get the best refinance rates, you’ll first need to make your application as robust as possible. The best way to improve your credit ratings is to organize your finances, use credit responsibly and monitor your credit regularly. Don’t forget to talk to several lenders and shop around.
Refinancing can be a great move if you get a good rate or can pay off your loan sooner – but think carefully about whether it’s the right option for you right now.
When do I have to refinance?
For refinancing to make sense, you will generally need to get an interest rate that is lower than your current rate. Aside from interest rates, changing the term of the loan is another reason to refinance. When deciding whether to refinance, be sure to consider other factors besides market interest rates, including how long you plan to stay in your current home, the term of the loan and the amount of your monthly payment. And don’t forget about fees and closing costs, which can add up.
With interest rates rising throughout 2022, the pool of refinance applicants has contracted. If you bought your home when interest rates were lower than they are today, there may be no financial benefit in refinancing your mortgage.