Both 15-year fixed and 30-year fixed refinances saw their average rates rise over the last seven days. The average rate on 10-year fixed refinance also moved up.
Amid its ongoing battle to fight inflation, the Federal Reserve announced a 0.25% hike to its target federal funds rate on May 3. Refinance rates, like mortgage rates, fluctuate on a daily basis and could see further movement in response, or they could stay generally the same.
"The market has already built in the expectations for a 25-basis-point hike in May and then no further hikes after that," says 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 rate hiking cycle may be in sight. Depending on incoming inflation data, the Fed may hold rates where they are -- but not cut them -- until inflation reaches its 2% goal.
"Ultimately, more certainty about the Fed's actions will help to smooth out some of the volatility we have seen with mortgage rates," says Odeta Kushi, deputy chief economist at First American Financial Corporation.
As the Fed aggressively ratcheted up its federal funds rate in 2022, refinance rates spiked, but we're seeing signs that rates may be slowly starting to level out as inflation eases.
For the first three meetings of 2023, the Fed has adopted smaller rate increases -- 25 basis points as compared with 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 average mortgage rate data for the past year, mortgage rates hit a peak in late 2022 and have been trending down since then. We're still a long way from the record-low refinance rates of 2020 and 2021, but borrowers may see rates fall in 2023.
"With the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow noticeably," 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 where rates are headed, homeowners shouldn't focus on timing the market, and should instead 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 do 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 fixed-rate refinance
The current average interest rate for a 30-year refinance is 7.12%, an increase of 9 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) Refinancing to a 30-year fixed loan from a shorter loan term can lower your monthly payments. Because of this, a 30-year refinance can be a good idea if you're having trouble making your monthly payments. However, interest rates for a 30-year refinance will typically be higher than rates for a 10- or 15-year refinance. It'll also take you longer to pay off your loan.
15-year fixed-rate refinance
The current average interest rate for 15-year refinances is 6.41%, an increase of 13 basis points from what we saw the previous week. 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 quicker. You'll 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 fixed-rate refinance
For 10-year fixed refinances, the average rate is currently at 6.48%, an increase of 11 basis points compared to one week ago. Compared to a 15- or 30-year refinance, a 10-year refinance will usually have a lower interest rate but higher monthly payment. A 10-year refinance can help you pay off your house much quicker and save on interest. But you should confirm that you can afford a higher monthly payment by evaluating your budget and overall financial situation.
Where rates are headed
At the start of the pandemic, refinance interest rates hit a historic low. But in early 2022, the Fed started hiking interest rates in an effort to curb runaway inflation. While the Fed doesn't directly set mortgage rates, the Fed rate hikes led to an increased cost of borrowing among most consumer loan products, including mortgages and refinances. Mortgage rates hit a 20-year high in late 2022.
Recent data shows that overall inflation has been falling slowly but steadily since it peaked in June 2022, but it still remains well above the Fed's 2% inflation goal. After raising rates by 25 basis points in March, the Fed has indicated (PDF) it plans to slow -- but not stop -- the pace of its rate hikes throughout 2023. Both of these factors are likely to contribute to a gradual pull-back of mortgage and refinance rates this year, although consumers shouldn't expect a sharp drop or a return to pandemic-era lows.
We track refinance rate trends using information collected by Bankrate. Here's a table with the average refinance rates reported by lenders across the US:
Average refinance interest rates
| Product | Rate | A week ago | Change |
|---|---|---|---|
| 30-year fixed refi | 7.12% | 7.03% | +0.09 |
| 15-year fixed refi | 6.41% | 6.28% | +0.13 |
| 10-year fixed refi | 6.48% | 6.37% | +0.11 |
Rates as of May 22, 2023.
How to shop for refinance rates
It's important to understand that the rates advertised online often require specific conditions for eligibility. Your interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application.
Having a high credit score, a 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 make sure to speak with a mortgage professional in order to see the specific rates you qualify for. To get the best refinance rates, you'll first want to make your application as strong as possible. The best way to improve your credit ratings is to get your finances in order, use credit responsibly and monitor your credit regularly. Don't forget to speak with multiple lenders and shop around.
Refinancing can be a great move if you get a good rate or can pay off your loan sooner -- but consider carefully whether it's the right choice for you at the moment.
Is now a good time to refinance?
Generally, it's a good idea to refinance if you can get a lower interest rate than your current interest rate, or if you need to change your loan term. When deciding whether to refinance, be sure to take into account 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 amount of your monthly payment. And don't forget about fees and closing costs, which can add up.
As interest rates increased throughout 2022, the pool of refinancing applicants contracted. If you bought your house when interest rates were lower than they are today, there may not be a financial benefit in refinancing your mortgage.
FAQs
Will refinance rates go down 2023? ›
Mortgage rates are likely to decrease slightly in 2023, although they're highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time.
How high will mortgage interest rates go in 2023? ›Mortgage Bankers Association (MBA).
“Long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.2%.”
Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.
What will refinance rates be in 2024? ›The average interest rate for the benchmark 30-year fixed mortgage reached 7.08%, as of Monday. However, with the economy expected to cool and possibly dip into a recession, many recent forecasts expect rates to drop to 6% or below in 2024, including a Fannie Mae projection of 5.2%.
Will home equity rates go up in 2023? ›“Some economists predict a 2% increase on equity rates by the beginning of 2023.” To be clear: The exact interest rate you'll get on a home equity loan varies based on your lender, credit score, loan amount, loan term and how much equity you have in your home.
What is the interest rate prediction for may 2023? ›“While the RBA will likely move more slowly in 2023 than it did in 2022, we now expect four more 25 basis point hikes this year: 25 basis points in each of February and March, and 25 basis points each at the May and August meetings.”
What is the interest rate forecast for may 2023? ›The mortgage interest rate forecast for May 2023 is for rates to stay in the 6% range, as long as inflation stays in check. That's welcome news for mortgage seekers who just over a month ago were frustrated by a rise in rates sparked by unexpectedly persistent inflationary pressure.
What will mortgage rates be in July 2023? ›According to MBA, mortgage rates will conclude in 2023 at roughly 5.4%. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage is currently 6.94%.
Will mortgage rates ever go back to 3 percent? ›Even so, Evangelou doesn't expect mortgage rates to go back to 3% anytime soon but notes that even fixed mortgage rates below 6% will still be less than the historical average of roughly 8%. Other experts agree that rates will likely come down in the next few years.
What will a 30 year mortgage be in 2023? ›As of May 25, 2023, the 30-year fixed mortgage rate is 7.36%, the FHA 30-year fixed rate is 7.39%, the VA 30-year fixed rate is 7.23% and the jumbo 30-year fixed rate is 6.27%.
Will 2023 be a good time to buy a house? ›
The most recent Homebuyer.com data indicates that, for first-time home buyers, May 2023 is a good time to buy a house. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.
What will mortgage rates be in fall 2023? ›The Mortgage Bankers Association predicts rates will fall to 5.5 percent by the end of 2023 as the economy weakens. The group revised its forecast upward a bit — it previously expected rates to fall to 5.3 percent.
How high will mortgage rates go? ›While it expects the Fed to continue increasing rates to tame inflation, it believes that long-term rates have already peaked. “We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It reiterated the fourth-quarter 5.2% rate prediction in a Jan. 19 forecast.
How high could mortgage rates go by 2025? ›30-Year Mortgage Interest Rate Projected Forecast 2025. The 30 Year Mortgage Rate will continue to rise further in 2025. The 30 Year Mortgage Rate forecast at the end of the year is projected to be 16.25%.
What will home interest rates be in the spring of 2023? ›| March 2023 | February 2023 | |
|---|---|---|
| Conforming Loan Rates | 6.40% | 6.68% |
| FHA Loan Rates | 6.37% | 6.49% |
| VA Loan Rates | 6.06% | 6.25% |
| Jumbo Loan Rates | 6.56% | 6.43% |
Bankrate's forecast for home equity rates
McBride expects that number to reach 8.25 percent by the end of 2023. For fixed-rate home equity loans, the average rate was 7.87 percent for 15-year loans and 7.93 percent for 10-year loans, according to Bankrate's survey.
As of now, you can expect home equity rates to remain elevated in 2023. If you're making payments on a HELOC, pay especially close attention to rate changes.
What interest rate hikes are expected in 2023? ›The Federal Reserve is expected to raise the fed funds rate by 25 basis points to a range of 5%-5.25% during its May 2023 meeting, marking the 10th increase and bringing borrowing costs to their highest level since September 2007.
Will there be more interest rate hikes in 2023? ›The US Federal Reserve will deliver a final 25-basis-point interest rate increase in May and then hold rates steady for the rest of 2023, according to a Reuters poll of economists. The poll also showed that a short and shallow US recession is likely this year.
Will US interest rates rise again in 2023? ›The Fed raises interest rates again in what could be its final attack on inflation. Federal Reserve Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, D.C, on March 22, 2023. The Fed raised interest rates again Wednesday but signalled it may be the last hike for a while.
What will USA interest rates be in 2023? ›
The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 5.15 percent, effective May 4, 2023.
What will mortgage rates be in June 2023? ›| Month | Low-High | Close |
|---|---|---|
| 2023 | ||
| May | 6.37-6.77 | 6.57 |
| June | 6.56-6.96 | 6.76 |
| July | 6.70-7.12 | 6.91 |
How Many Times Can I Refinance My Mortgage? There's no legal limit on the number of times you can refinance your home loan. However, mortgage lenders do have a few mortgage refinance requirements that need to be met each time you apply, and there are some special considerations to note if you want a cash-out refinance.
How long will interest rates stay high? ›'I believe by the end of 2023 we will see rates start to fall with a target of between 2.5 to 3 per cent in 2024. 'I believe if the base rate can get back to circa 2.5 per cent, then we will see rates hovering around that mark with a return to products that have not been seen in the mortgage industry for some time.'
Is 3.5 a good mortgage rate for 30 years? ›Is a 3.5% interest rate good? In today's climate, 3.5 percent interest on a mortgage is below average. In 2020 and 2021, during the record low rates of the pandemic, 3.5 percent was above average for a new 30-year mortgage.
What is the best day to close on a house? ›This delay in itself will not cost you extra money, but if the 3-day delay pushes the repayment of the old loan too close to the weekend, you could end up with a longer overlap in interest payments. You will ideally want to sign your documents on a Tuesday or Wednesday to avoid this issue.
Are mortgage rates expected to drop in 2023? ›And the Mortgage Bankers Association (MBA) is a bit more optimistic, forecasting that mortgage rates for 30-year fixed-rate mortgages will head downward in 2023 and end the year at about 5.2%.
Are bank interest rates going down in 2023? ›With rising federal funds rates comes an increase in savings interest rates. Federal Reserve Board members and Federal Reserve Bank presidents predict the federal funds rate will reach between 3.9% and 4.9% in 2023.
What is the interest rate prediction for May 2023? ›“While the RBA will likely move more slowly in 2023 than it did in 2022, we now expect four more 25 basis point hikes this year: 25 basis points in each of February and March, and 25 basis points each at the May and August meetings.”
Where will mortgage rates be in spring 2023? ›| March 2023 | February 2023 | |
|---|---|---|
| Conforming Loan Rates | 6.40% | 6.68% |
| FHA Loan Rates | 6.37% | 6.49% |
| VA Loan Rates | 6.06% | 6.25% |
| Jumbo Loan Rates | 6.56% | 6.43% |
What is the mortgage rate forecast for 5 years? ›
ING predicts rates to range from 5% in the second quarter of 2023, rising to 5.5% in the third quarter, and then falling back to 5% in the final quarter of the year. They also predict interest rates ranging between 3% and 4.25% in 2024, staying at 3% by the end of 2025.