Mortgage rates are still high, giving existing homeowners little financial incentive to refinance. Although many hoped for a more affordable housing market after the Federal Reserve cut interest rates three times this year, the outlook for mortgage rates in 2025 has only gotten dimmer.
Even if rates go down, a refinance boom like the one we saw at the beginning of the pandemic is unlikely to occur. Most existing homeowners have cheap mortgages and are unlikely to want to replace them with more expensive ones. Until refinance rates go below 6%, only homeowners with rates closer to 8% can save money on their monthly payments by refinancing.
If you’re considering refinancing for another reason, it’s a good idea to monitor rates daily or weekly. To learn more about what experts are forecasting in the mortgage refinance market, check out our weekly mortgage rate forecast.
When mortgage rates start falling, be ready to take advantage. Experts recommend shopping around and comparing multiple offers to get the lowest rate. Enter your information here to get a custom quote from one of CNET’s partner lenders.
Today’s refinance rate trends
In 2024, it was expected that inflation would continue to decline and that the Fed would carry out a series of rate cuts, causing mortgage refinance rates to gradually decline.
But stronger-than-expected inflation and labor market data changed investor expectations. Mortgage rates remained high, as did overall financing costs. Uncertainty over the presidential election also contributed to a rise in bond yields and mortgage rates.
Donald Trump’s new administration may implement economic policies that investors worry will increase the government debt deficit and inflation. If price growth rebounds next year, which many economists expect, the central bank could delay further interest rate cuts, preventing mortgage rates from falling to more moderate levels.
Refinance Rate Forecast for 2025
The central bank controls inflation and unemployment by adjusting interest rates. It raises rates to slow the economy and lowers them to stimulate it. However, even though its decisions affect the overall direction of lending rates, the Fed does not directly control the mortgage market.
“There was initially hope that the Fed’s actions would result in a steady decline in rates in 2025 and beyond,” said Rob Cook, chief marketing officer at Discover Home Loans. “However, the outlook has changed to a more flat-rate environment as the economic outlook becomes more uncertain.”
The central bank has indicated it may take a “wait and see” approach, keeping rates steady for several months to observe inflation and unemployment trends. Refinance rates could still fall in the coming months, potentially to 6.5% or lower, but overall housing activity is expected to remain low.
Refinancing 101
When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you’ll use your equity with a new loan that’s larger than your existing mortgage balance, allowing you to keep the difference in cash.
If you get a lower rate or can pay off your home loan in a shorter period of time, refinancing can be a great financial move, but consider whether it’s the right choice for you. Lowering your interest rate by 1% or more is an incentive to refinance, allowing you to significantly cut your monthly payment.
But refinancing your mortgage isn’t free. Since you’re taking out a new home loan, you’ll have to pay another set of closing costs. If you fall into the group of homeowners who bought property when rates were high, consider contacting your lender and running the numbers to see if a mortgage refinance is a good fit for your budget, said Logan Mohtashami, principal analyst at HousingWire.
How to find the best refinance rates
Rates advertised online often require specific conditions for eligibility. Your individual interest 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 typically help you get the best interest rates.
30-Year Fixed-Rate Refinance
The average rate for a 30-year fixed refinance loan is currently 7.01%, a decrease of 4 basis points compared to a week ago. (One basis point is equal to 0.01%.) A 30-year fixed refinance will typically have a lower monthly payment than a 15-year or 10-year refinance, but it will take you longer to pay it off and will typically cost you more interest over the long term.