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Homeowners and homebuyers hoping for low mortgage rates have had a rough few years. After rates fell to record lows during the pandemic, they soared in the years following as the Federal Reserve repeatedly raised interest rates to fight inflation.
Americans accustomed to rates in the 3.00% to 4.00% range or below struggled to find loans below 7%. This left many would-be borrowers sitting on the sidelines hoping low mortgage rates would some day return. This included not just buyers, but those hoping to refinance their mortgage as well.
Fortunately, the tides are turning and those eager for mortgage rates to fall have started to see that dream become a reality. Current mortgage rates and refinance rates are down more than a point off post-pandemic highs and, with the Federal Reserve cutting the benchmark rate by 50 basis points at its September meeting, it’s not surprising rates have dropped to a 2-year low.
The big question now is, should you refinance in October or wait for rates to decline further? We asked some experts for their thoughts.
See how low of a mortgage refinance rate you could secure now here.
Should you refinance your mortgage this October?
Although many homeowners will find that waiting for further rate drops is the right move, this doesn’t mean everyone should delay.
“If you need money now, it could be the perfect time to refinance,” advises Domenick D’Andrea, a financial advisor and co-founder of DanDarah Wealth Management. Many homeowners have been waiting years to refinance at an affordable rate and won’t want to delay even longer when there are finally opportunities to lower their payments or get a loan with more favorable terms.
“Locking in a lower rate can reduce monthly payments, save on interest over time, or allow for quicker repayment,” says Douglas A. Boneparth, a certified planner, Financial Advisor and President of Bone Fide Wealth. “Additionally, if your home has appreciated in-value, you might access better terms or eliminate private mortgage insurance (PMI). Refinancing ahead of the holiday season or year-end can help streamline your finances going into the new year.”
Boneparth also warns that if home values start to decline, that could impact your eligibility to refinance. It’s also worth considering that while most experts believe rates will fall, there’s no guarantee as to when or how fast that will happen.
“Timing the market exactly right is nearly impossible to do, so if your mortgage is at 7% or 8%, we highly advise talking with a mortgage professional to see what options might be available to you,” advises Nina Gidwaney, Head of Refinance and Home Equity for Chase Home Lending.
When you shop around and compare your options, you may just find that getting a guaranteed lower rate and immediate relief from high payments today is more valuable to you than waiting months for a potentially lower future rate months in the future.
Start shopping for refinance rates and lenders online today.
Waiting to refinance could pay big dividends
With mortgage rates on the decline, some homeowners have already been spurred to action.
“With a recent Fed interest rate cut of 50 basis points, we’re already seeing refinance volume pick up as homeowners look to lower their monthly payments or use the equity in their home to take out cash,” says Gidwaney.
However, acting too quickly could mean giving up the chance at lower rates are on the horizon, or potentially putting yourself in a situation where you don’t realize all the savings that could be available later.
“All signs point to potentially two more rate decreases by the end of the year,” says D’Andrea. “If you believe rates will continue in a downward trend, at least wait for the next two Fed decisions. If they only lower the rate by 25 basis points during each of the next two meetings, that could save you about $150 a month on a $500K refinance over the next 30 years.”
Beverly Hankinson, Senior Vice President and mortgage loan advisor manager at Frost Bank also warns that while the Fed cut the benchmark rate in September, that doesn’t mean borrowers will benefit from a big rate drop this October. “Remember that while the Fed has lowered short-term rates, mortgage rates, which are long-term, aren’t typically immediately affected and are slower to move.”
If rates don’t drop further this month, some buyers will still find opportunities to save but must do the math carefully to see if refinancing is worthwhile. “Refinancing may not be ideal if rates aren’t meaningfully lower than your current rate or if you face high closing costs that can outweigh the immediate benefits,” Boneparth says.
The high costs that often come with refinancing are a deterrent for homeowners who may be thinking about refinancing now and again later if rates drop further. “You want to make sure you are not going to end up doing multiple refinances since there are closing costs involved, which will negate the savings if you don’t hold the mortgage for long enough,” says Sarah Alvarez, Vice President of Mortgage Banking at William Raveis Mortgage.
The bottom line
Ultimately, the decision to refinance your mortgage now is a personal one. For some owners, it may be beneficial to take advantage of today’s lower rates immediately. Others, however, could benefit by waiting for rates to potentially fall further. Weigh your options and risk tolerance carefully and start comparing lenders and terms online now to better determine your path forward.
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