Refinance rates down since last week: Mortgage refinance rates on August 21, 2024
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Since 2022, refinancing activity has declined in response to rising mortgage rates. But as inflation normalizes and the Federal Reserve prepares to cut rates next month, mortgage rates should begin to decline. When that happens, more homeowners, especially those with high interest rates on their home loans, will benefit from refinancing.
Today’s average refinancing rates
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Refinancing
If mortgage rates fall, you may want to refinance your home loan and take out a new one with a lower interest rate. Start by comparing multiple offers to get the lowest rate. Enter your details here to get a personalized quote from one of CNET’s partner lenders.
About these tariffs: Like CNET, Bankrate is part of Red Ventures. This tool offers partner rates from lenders that you can use when comparing multiple mortgage rates.
News on the refinancing rate
Mortgage refinance rates have fallen due to lower inflation and labor market data. Still, the majority of homeowners whose mortgage rates are well below 6% would not benefit from refinancing at today’s rates.
Despite the recent decline, experts do not expect another refinancing boom like in 2020 and 2021, when mortgage rates hit historic lows.
“That’s not yet low enough to trigger a surge in refinancing activity, but if rates fall below 6%, that would change,” said Matt Graham of Mortgage News Daily.
What you should know about refinancing interest rate trends in 2024
Experts say that easing inflation and the Federal Reserve’s planned interest rate cuts should help mortgage rates fall to around 6% by the end of 2024. But a lot can still happen in the economy between now and then.
Although the Fed has not adjusted interest rates since last summer, a rate cut now appears imminent in September, according to Melissa Cohn, regional vice president of William Raveis Mortgage and a member of CNET Money’s expert panel.
If you’re considering refinancing, remember that you can’t time the economy: Interest rates fluctuate hourly, daily and weekly and are affected by a number of factors. It’s best to keep an eye on daily rate changes and have a plan for how to capitalize on a large enough percentage drop, Graham says.
What you should know about refinancing
When you refinance your mortgage, you take out another home equity loan that you use to pay off your original mortgage. With a traditional refinance, your new home equity loan has a different term and/or interest rate. With a cash-out refinance, you tap into your equity with a new loan that is larger than your existing mortgage balance, allowing you to pocket the difference in cash.
Refinancing can be a good financial move if you can get a low interest rate or pay off your home equity loan in a shorter period of time, but consider whether it’s the right choice for you. A reduction in your interest rate of 1% or more is an incentive to refinance because it can significantly lower your monthly payment.
Choose the right refinancing type and term
Interest rates advertised online often come with certain conditions attached. Your personal rate will be affected by market conditions as well as your specific credit history, financial profile and application. A high credit score, low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best rates.
Refinancing with 30-year fixed interest rate
For 30-year fixed-term refinances, the average interest rate is currently 6.51%, down 3 basis points from the same time last week. (One basis point equals 0.01%) With a 30-year fixed-term refinance, monthly payments are typically lower than with a 15- or 10-year refinance, but it takes longer to pay off and will typically cost you more in interest over the long run.
Refinancing with 15-year fixed interest rate
For 15-year fixed refinances, the average interest rate is currently 5.98%, down 2 basis points from last week. Although a 15-year fixed refinance will most likely increase your monthly payment compared to a 30-year loan, you’ll save more money over time because you’ll pay off your loan faster. Additionally, interest rates on 15-year refinances are typically lower than 30-year refinances, saving you more in the long run.
Refinancing with 10-year fixed interest rate
The average 10-year fixed refinance rate is currently 5.96%, down 9 basis points from last week. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your home much faster and save on interest, but make sure you can afford the higher monthly payment.
To get the best refinancing rates, make your application as compelling as possible by getting your finances in order, using credit responsibly and checking your credit score regularly. And don’t forget to talk to multiple lenders and shop around.
Reasons for refinancing
Homeowners usually refinance to save money, but there are other reasons for doing so as well. Here are the most common reasons for refinancing:
- Here’s how to get a lower interest rate: If you can secure an interest rate that is at least 1% lower than your current mortgage, refinancing might make sense.
- How to change your mortgage type: If you have a variable rate mortgage and want more security, you can refinance to a fixed rate mortgage.
- How to avoid mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance it to a conventional loan once you have 20% equity.
- To change the length of a loan term: Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run.
- How to use your equity through cash-out refinancing: If you replace your mortgage with a larger loan, you can get the difference in cash to cover a large expense.
- How to remove someone from the mortgage: In the event of a divorce, you can apply for a new home loan in your name only and use the funds to pay off your existing mortgage.
