With interest rates dropping, some homeowners may benefit from filing a mortgage refinance application now.
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An interest rate cut issued in September was widely anticipated by a wide range of Americans, but arguably most strongly by current homeowners. This group, specifically those who purchased a home after 2022, has largely suffered under the burden of elevated mortgage interest rates. In many cases, the rate they secured was exponentially higher than what they would have been offered at the beginning of the decade, when mortgage rates were near 2%.
So a rate cut from the Federal Reserve, then, obviously offered some relief. And even though the central bank doesn't directly dictate mortgage rates and even though the cut on September 17 was in a marginal, 25 basis point amount, it was still a step in the right direction. Consequently, mortgage refinancing demand surged, opening the door for those homeowners saddled with high rates to finally realize some relief.
While many experts would recommend a mortgage refinance for those who can secure a new rate a full percentage point lower than their existing one, many others may find it valuable to refinance, even for just half a percentage point difference. To determine which category you fall in, however, it helps to know what a good mortgage refinance rate is considered to be this October. Below, we'll detail what to know right now.
Start by seeing how low your current mortgage refinance rate offers are here.
What's a good mortgage refinance interest rate this October?
A "good" mortgage refinance rate is generally defined by the homeowner. For example, if you have a current rate of 7.5%, as many homeowners who bought in recent years do, a rate of 7% can be considered good while one of 6.5% or lower can be considered even better. And, if you can get a rate of 6.25% or lower, then it's generally advisable to act now.
For reference, here's what the average mortgage refinance rates are now, according to Money.com:
- 15-year refinance rate: 5.87%:
- 30-year refinance rate: 6.51%
So, depending on what initial rate you secured, rates are potentially already low enough here to justify refinancing. There are also ways to secure a rate even lower than those listed above. You can pursue an adjustable-rate mortgage (ARM), for example, which will secure a rate for an initial, temporary period only. But it could be low enough to make a real financial difference.
Here's what refinance rates look like for adjustable-rate mortgages now:
- 7/1 adjustable mortgage refinance rate: 5.97%
- 10/1 adjustable mortgage refinance rate: 6.24%
While these rates will expire after seven or 10 years, respectively, they're still worth investigating now. Homeowners should also consider purchasing mortgage points, which act as a fee to the lender to secure an even lower rate. Mortgage points, combined with today's lower refinance rates, could materially lower your existing rate, perhaps to such a degree that another refinance in the future may not even be necessary.
Learn more about all of your current mortgage rate options here.
The bottom line
The definition of a good mortgage refinance rate in today's economy is in the eye of the beholder. For many homeowners, a rate that's half a percentage point lower than their current one is good enough, while others may be looking to see one that's a full point lower to justify an application. Some, meanwhile, may find that today's available rates, either via an ARM or by tacking on mortgage points, may put them in an affordable enough position to act. And remember that additional rate cuts from the Fed are widely anticipated for the next two meetings in October and December. In other words: If you can't quite figure out a way to justify refinancing now, there may be new ways to do so in the weeks to come.
Edited by Angelica Leicht
