Did mortgage rates hit their peak in 2022? That is the hope that many market watchers have (homeowners and mortgage lenders alike) amid the general downward trajectory of rates in recent weeks.  The average mortgage rate for a 30-year, fixed-rate mortgage was 6.39 percent for the week ending April 20, 2023, according to data from the Federal Home Loan Mortgage Corporation. That was a slight increase from the prior week but followed five consecutive weeks of rate decreases. 

Some rate-tracking organizations’ project rates will continue to fall throughout 2023, some predict rates will dip below 6 percent by year’s end. That’s good news for consumers. Significant rate drops tend to increase demand for mortgage refinancing as homeowners jump at the chance to shave thousands of dollars off of the price of their loan. 

Rate decreases so far in 2023 have led to some increased demand for refinancing, but data from the Mortgage Bankers Association show mortgage applications still remain at the lowest levels in two decades. Refinance applications have increased in the short term but still are more than 60 percent below 2022. That’s largely due to the fact that mortgage rates are nearly double that of the rate at this time in 2022.  

Many homeowners are waiting to refinance in hopes that mortgage rates will continue to decrease. That means mortgage lenders can expect an influx of refinance activity in the months ahead if projections of further and more significant rate decreases for the remainder of 2023 hold true. 

Refinancing your mortgage does have its advantages, including lower monthly payments and decreased interest paid over the life of a loan. Even a decrease of a couple of percentage points can help homeowners save thousands of dollars over the life of a mortgage. That money then can be put toward other things, such as paying down credit card debt, saving for retirement, or helping put a student through college or related training certification. 

Homeowners with an adjustable-rate mortgage may see a drop in interest rates as an opportunity to switch to a fixed-rate loan, which can provide more predictability and stability. However, determining when to refinance can be challenging. Generally, refinancing makes the most sense when rates are at least 1 percent lower than a homeowner’s current rate. That is due to the closing costs and other fees that typically are associated with refinancing. In some cases, mortgage lenders will negotiate lower or no closing costs to be able to secure that piece of business. 

For some, refinancing may present an opportunity to shift to a shorter-term loan. Conversely, refinancing might not always yield less interest over the life of a loan. Say you want to refinance a mortgage with 26 years left on it from 5 percent to a new 30-year mortgage at a 4 percent interest rate. Doing so would actually lead to you paying more than $13,000 in additional interest.  

If you are considering refinancing, a mortgage calculator can be a beneficial tool for determining whether that is the best course of action. Deciding whether to refinance is a big decision and one that shouldn’t be taken lightly. Our team of mortgage experts at RailTrust Mortgage can guide you through the process to help you determine the best path for your family’s needs. 
Contact us today.