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Both 15-year and 30-year refinances saw their average rates rise this week. The average interest rate on 10-year fixed refinancing also increased.
Like mortgage rates, refinance rates fluctuate daily and vary from lender to lender, but also rise and fall over the long term based on general market conditions and macroeconomic factors. Funding rates skyrocketed in 2022 as the Federal Reserve hiked the federal funds rate to curb inflation, but we see signs that rates may slowly start to decline.
The 0.25% rate hike announced on Feb. 1 after the last Fed meeting is the smallest since March 2022, a sign that the Fed may ease its aggressive rate hikes as inflation falls. Looking at average mortgage rate data for the past year, mortgage rates peaked in late 2022 and have been trending down ever since. We’re still a long way from the record-low refinancing rates of 2020 and 2021, but borrowers could expect falling interest rates in 2023.
“Against the backdrop of easing inflationary pressures, we should see a more consistent fall in mortgage rates throughout the year, particularly if the economy and jobs slow noticeably,” said Greg McBride, CFA and chief financial analyst at Bankrate. (Bankrate, like CNET Money, is owned by Red Ventures.) He expects 30-year fixed-rate mortgage rates to end the year near 5.25%.
Regardless of where interest rates are heading, homeowners shouldn’t focus on market timing and instead should be deciding whether refinancing makes sense for their financial situation. As long as you can get a lower interest rate than your current interest 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 interest rates, fees, and the APR — which reflects the total cost of borrowing — from different lenders to find the best deal.
30 year fixed rate refinancing
The average interest rate on a 30-year fixed refinance loan is currently 6.87%, up 25 basis points from this time last week. (One basis point equals 0.01%.) Refinancing into a 30-year term loan from a shorter loan term can lower your monthly payments. If you’re currently struggling to make your monthly payments, a 30-year refinance could be a good option for you. However, interest rates on a 30-year refinance are typically higher than interest rates on a 10- or 15-year refinance. It will also take longer to repay your loan.
15 year fixed rate refinancing
The average 15-year fixed refinancing rate is currently 6.19%, up 28 basis points from what we saw last week. Refinancing into a 15-year term loan from a 30-year term loan will likely increase your monthly payment. On the other hand, you save money on interest because you pay off the loan earlier. You also usually get lower interest rates compared to a 30-year loan. So you can save even more in the long run.
10 year fixed rate refinancing
The current average interest rate on a 10-year refinance is 6.11%, up 23 basis points from last week. With a 10-year fixed refinance, you’ll pay more every month than with 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 home much faster and save on interest. Just be sure to carefully review your budget and current financial situation to ensure you can afford a higher monthly payment.
Where does the interest go
At the beginning of the pandemic, refinancing rates reached an all-time low. But in early 2022, the Fed began raising interest rates to curb runaway inflation. While the Fed does not set mortgage rates directly, the Fed’s rate hikes have increased the cost of borrowing for most consumer credit products, including mortgages and refinancing. Mortgage rates hit a 20-year high in late 2022.
Recent data shows that headline inflation has fallen slowly but steadily since peaking in June 2022, but is still well above the Fed’s inflation target of 2%. After raising interest rates by 25 basis points in February, the Fed has indicated (PDF) that it plans to slow – but not stop – the pace of its rate hikes throughout 2023. Both factors should contribute to a gradual decline. Mortgage and refinancing rates this year, though consumers shouldn’t expect a sharp drop or a return to pandemic-era lows.
We track refinance rate trends using data collected by Bankrate, owned by CNET’s parent company. Here is a table of the average refinance rates reported by lenders across the country:
Average refinancing rates
| product | rate | A week ago | Change |
|---|---|---|---|
| 30 years of fixed ref | 6.87% | 6.62% | +0.25 |
| 15 year fixed ref | 6.19% | 5.91% | +0.28 |
| 10 year fixed ref | 6.11% | 5.88% | +0.23 |
Prices as of February 16, 2023.
How to shop refinance rates
It is important to understand that the fares 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.
A strong credit score, low credit utilization, and a history of consistent and timely 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 expert to see the specific interest rates you qualify for. To get the best refinancing rates, you should first make your application as strong as possible. The best way to improve your credit score is to get your finances in order, use credit responsibly, and monitor your credit regularly. Don’t forget to talk to multiple lenders and do your research.
Refinancing can be a good move if you can get a good interest rate or pay off your loan sooner – but think carefully if it’s the right choice for you at the moment.
When to Consider Mortgage Refinancing
In general, refinancing is a good idea when you can get a lower interest rate than your current interest rate or when you need to change your loan term. When deciding whether to refinance, consider other factors besides market interest rates, including how long you plan to stay in your current home, the length of your loan term, and the size of your monthly payment. And don’t forget fees and closing costs, which can add up.
As interest rates rose throughout 2022, the pool of refinance seekers shrank. If you bought your home when interest rates were lower than they are today, there may not be any financial benefit from refinancing your mortgage.
