Refinance Rates for Oct. 4, 2023: Rates Trend Higher The Fed's interest rate hikes have affected the refinance market
Multiple key refinance rates were higher this week
Both 15-year fixed and 30-year fixed refinances saw their average rates go higher this week. The average rates for 10-year fixed refinances also made gains.
At the start of the pandemic, refinance rates were at historic lows of around 3%. Then, in early 2022, the Federal Reserve stepped in to curb inflation by hiking its key short-term interest rate, the federal funds rate. The Fed doesn't directly set mortgage rates, but a higher federal funds rate has a ripple effect on all forms of borrowing, including mortgages and refinances.
After nearly 11 consecutive rate hikes, the Fed took a pause during its Sept. 20 Federal Open Market Committee meeting. Yet because the Fed won't consider making cuts to its key rate until 2024 at the earliest, experts say mortgage rates are likely to stay elevated for the time being.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple refinance rates.
If inflation continues to decline and the Fed is able to hold rates steady, mortgage refinance rates should be able to stabilize. But given that refinance rates have been in the 6% to 7% range for a while, it's unlikely they'll be returning to the 2% to 3% range. If you purchased a house more than a year ago, you probably won't be able to save money by refinancing to a mortgage with a lower rate.
Homeowners can't time the market. Regardless of where rates are headed, you should decide if refinancing makes sense based on your financial situation and goals. As long as you can get a lower interest rate than your current one, refinancing could save you money. If you decide to refinance, make sure to compare rates, fees and the annual percentage rate -- which reflects the total cost of borrowing -- from different lenders to find the best deal.
30-year fixed-rate refinance
The average 30-year fixed refinance rate right now is 8.06%, an increase of 14 basis points over this time last week. (A basis point is equivalent to 0.01%.) One reason to refinance to a 30-year fixed loan from a shorter loan term is to lower your monthly payment. Because of this, a 30-year refinance can be a good idea if you're having trouble making your monthly payments. Be aware, though, that interest rates will typically be higher compared to a 10- or 15-year refinance, and you'll pay off your loan at a slower rate.
15-year fixed-rate refinance
The current average interest rate for 15-year refinances is 7.17%, an increase of 16 basis points over last week. A 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan. On the other hand, you'll save money on interest, since you'll pay off the loan sooner. Interest rates for a 15-year refinance also tend to be lower than that of a 30-year refinance, so you'll save even more in the long run.
10-year fixed-rate refinance
The average rate for a 10-year fixed refinance loan is currently 6.95%, an increase of 6 basis points from what we saw the previous week. You'll pay more every month with a 10-year fixed refinance compared to 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 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
Mortgage rates move up and down on a daily basis in response to a variety of economic factors, including inflation, policy changes from the Fed and the outlook for the economy more broadly. For most of the summer, refinance rates fluctuated between 6.5% and 7%, but in late August, rates surged above 7%.
The most recent Consumer Price Index shows annual inflation at 3.7% in August, down significantly from its peak at 9.1% in June 2022. Still, consumer price growth remains above the Fed's 2% year-over-year target rate.
Depending on incoming inflation data, the Fed may hold rates where they are for a while, but the central bank is far from cutting rates. The cumulative effects of the Fed's policy decisions will take months to work its way through the economy.
We track refinance rate trends using data 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 | 8.06% | 7.92% | +0.14 |
| 15-year fixed refi | 7.17% | 7.01% | +0.16 |
| 10-year fixed refi | 6.95% | 6.89% | +0.06 |
Rates as of October 4, 2023.
How to find personalized 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.
When to consider a mortgage refinance
In order for a refinance to make sense, you'll generally want to get a lower interest rate than your current rate. Aside from interest rates, changing your loan term is another reason to refinance. 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.
This story originally appeared on: CNet - Author:Katherine Watt
