There are many good reasons to refinance when conditions are right. If you secured your existing mortgage when interest rates were higher than they are today, refinancing at a lower rate can save you money on your monthly payment or allow you to pay off the loan faster (and sometimes both). When you refinance your mortgage, you pay off your existing mortgage with a new home loan that comes with new rates and terms. The average rate for a 30-year fixed mortgage may fall close to 5.7% by year-end, according to the most recent housing forecast from Fannie Mae. We’re still a long way from the record-low refinance rates of 20, but borrowers may see rates fall in 2023. 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. A pause from the central bank could come as soon as next month, but that’ll depend on incoming economic data including employment numbers. In April, inflation was at 4.9%, down slightly from 5.0% in March. Instead, the central bank is expected to hold rates where they are - but not cut them - for an extended period of time to see the cumulative effect on inflation. If inflation continues to trend downward, the Fed has signaled that ongoing rate increases may no longer be necessary to bring inflation down to its 2% target. “In the current market with elevated rates, we see people doing refinances for very specific reasons, including needing to tap into the equity of the home, taking someone off of a mortgage or because their adjustable rate mortgage has expired,” said Melissa Cohn, regional vice president at William Raveis Mortgage. More homeowners who would’ve sought cash-out refinances have instead turned to home equity loans and home equity lines of credit as ways to tap into their home equity for cash. Unless you purchased a house within the past 12 months, it’s unlikely you can save money by refinancing to a mortgage with a lower rate. Last year’s run-up in mortgage rates led to a drop in refinancing activity that continues in 2023. ![]() Via higher interest rates, the Fed hopes to pull back consumer spending by making it more expensive to borrow money. ![]() Mortgage rates are also being pushed up as the Fed has raised its short-term interest 10 times since last March - most recently by 0.25% on May 3. Such factors include high inflation, which hit 9.1% last summer, the highest in 40 years. Mortgage rates are expected to be pushed up as different factors tug at the market. If you’re looking to refinance, it could make sense to do so now, depending on what you plan to do with the cash and your old and new interest rates. Since the start of 2023, however, mortgage refinance rates are seeing some relief as inflation cools.įollowing the Federal Reserve’s May meeting, mortgage rates continue to fluctuate in the 6% range. Refinance rates skyrocketed last year, as short-term interest rates increased multiple times.
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