In the days leading up to the Federal Reserve’s latest interest rate cut of 50 basis points, mortgage rates dipped. One day before the Fed’s meeting, the average mortgage refinance rate on a 30-year loan was 6.01%, the lowest rate since February 2023. However, mortgage refinance r🌌ates incꦓreased sharply on Sept. 18, and have been hovering around 6.30% ev☂er since.

While the Fed does not directly impact mortgage rates, it can influence what lenders charge borrowers. Since the Fed’s meeting two weeks ago, we’ve seen other mortgage indicators start to increase. Mortgage refinance applications the week ending Sept. 20 were up 20% from the week prior, while new purchase mortgage applications rose 11% in that same time, the highest level since July 2022, according to the Mortgage Bankers Association.

S♚o, with mortgage refi rates now higher than they were two weeks ago, an increase in mortgage refinance applications, and the Fed’s November meeting on the horizon, is now the right time to refinance your mortgage?

How Much Could ꦏYou Save by Refinancing Your Mortgag🌃e Right Now?

Let’s say yo♔u bought a home worth  $430,000 in September 2023. You got a 30-year fixed rate mortgage with an interest rate of 7.50% after putting 20% down on the home. Not including home insurance or property taxes, your monthly payment on your mortgage of $344,000 would be about $2,405.

If you refinance your home right now, with the remaining balance of about $340,500, and secure an interest rate of 澳洲幸运5官方开奖结果体彩网:6.27% for a new 30-year mortgage, this would lower your monthly payment to about $2,125, a savings of $280 per month. (To see what these rates would look like for your home, use our 澳洲幸运5官方开奖结果体彩网:mortgage calculator.)

When you refinance, you’re creating a new mortgage to replace your old one—complete with closing costs. For a refinance, closing costs are typically 3% to 6% of the loan amount, or an average of $5,000, according to Freddie Mac.

For a refinance to make economic sense, your monthly savings should exceed the closing costs over the life of your mortgage. If you paid 3% closing costs on your mortgage refi balance of $344,500, you’d pay $10,335. It would take you about 37 months𓆉 to break even. After that, the savings are all yours to enjoy.

Refinance R🌊ight Now💙: Is It Worth It or Should You Wait?

Refinancing today to a lower mortgage interest rate will save you money. However, the amount you save will all depend on your current rate, your new rate, and how much money is left🅰 on your home loan. As with the examples above, you could refinance today and save at least some money per month on your mortgage. But waiting for an even lower interest rate could save you more.

The question of exactly when to pull the trigger on refinancing is a tough one, as we can’t know exactly how low rates will go in the future. Jerome Powell said Monday that the Fed is in 澳洲幸运5官方开奖结果体彩网:no rush to lower rates now that the economy is running somewhat smoothly. So there’s no guarantee that the Fed will influence lower mortgage rates in 2024. Some experts st🀅ill think that rates could go down.

“I am confident that the Fed will cut rates again this year,” said Melissa Cohn, regional vice president of William Raveis Mortgage.ꦺ “How much they will cut in 2025 will depend on the economy. The Fed’s ‘dot plot’ changes as the economy changes.”

Refinancing your home could be a financial win if you’re planning to be in your home for a while. Even if you refinance for a 50 basis point drop, recouping the average 3% to 6% in closing costs would only take a few years (depending on you༒r loan amount and interest rate). But if r🐠ates go down further, and you can get 1 or 2 percentage points off your rate, those closing costs may very well be worth it to get that lower interest rate and save hundreds per month. 

Changing Interest Rates: What to Watch For

The Fed’s next meeting concludes on Nov. 7, and while many experts expect an additional rate cut, how big it🎃 is remains to be seen. 

"If the economy slows more than we expect, then we can cut faster," Powell said at the National Association for Business Economics (NABE) Annual Meeting in Nashville, Tennessee. "If it slows less than we expect, we can cut slower. And that's really what's going to decide it."

Dampened inflation and rising unemployment may mean a larger rate cut, while rising inflation and/or a lower unemployment rate could make the Fed pause or reverse course. According to estimates from the latest Summary of Economic Projections, the Fair Open Market Committee members’ estimates for the appropriate range of the federal funds rate in 2025 is between 2.75% and 4.25%, with most participants voting in the 3.0% to 3.5% range.

“Remember that rates never move in a straight line,” Cohn said. “The ramifications of a🅘 Fed rate cut don’t necessarily mean lower rates for mortgages.”

So, while we can reasonably expect a downward trajectory for mortgage interest rates over the next year or two, there will be ups and downs during that time (which we have already seen since the l🐻ast Fed meeting).

Knowing the economic path ahead is likely to see lower interest rates, you may want to suppress the knee-jerk reaction to chase a small dip in mortgage rates and wait it out for better rates in the months to come. That said, the timing on when to lock in a low rate with a mortgage refinance is a personal decision, informed 𓆉by your current rate, the savings gained by the new rate, the cost to refinance, your monthly budget, and how long you plan to stay in your current home.

How We Track Mortgage Rates

The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a 澳洲幸运5官方开奖结果体彩网:loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.