Rising Interest Rates in Refinancing: May 26, 2023 Update
Current Refinance Rates on May 26, 2023: Rates Jump Higher
If you’re considering refinancing your mortgage in 2023, you might want to do it soon. Contrary to last week’s leveling-out trend, the current refinance rates have ticked up. Both 10-year fixed and 15-year fixed refinances experienced an increase in their average rates, while the average rate on 30-year fixed refinance mortgages also saw gains.
Why the Increase in Refinance Rates?
The increase in refinancing rates can be traced back to the Federal Reserve’s ongoing battle to combat inflation. On May 3, the Fed announced a 0.25% increase in its target federal funds rate. As with mortgage rates, refinance rates fluctuate daily and may continue to move in response to economic changes or stabilize.
Scott Haymore, Head of Capital Markets and Mortgage Pricing at TD Bank, says, “the market has already built in the expectations for a 25-basis-point hike in May and then no further hikes after that.” But, depending on incoming inflation data, the Fed may hold rates where they are, without cutting them, until inflation reaches its 2% goal.
Possible Easing of Refinance Rates
The good news is that inflation has gradually decreased since its peak last summer, so the Fed has signaled that the end of the current rate hiking cycle may be in sight. Furthermore, more certainty about the Fed’s actions will help to smooth out some of the volatility we have seen with mortgage rates, suggests Odeta Kushi, Deputy Chief Economist at First American Financial Corporation.
According to mortgage rate data from the past year, mortgage rates peaked in late 2022 and have been trending downwards. So while we’re still far from the record-low refinance rates of 2020 and 2021, borrowers may start seeing rates fall in 2023.
Greg McBride, CFA and Chief Financial Analyst at Bankrate, predicts that 30-year fixed mortgage rates will end the year at around 5.25%. But, he says, “with the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow noticeably.”
Homeowners should focus on deciding whether refinancing makes sense for their financial situation. Refinancing will likely save them money as long as they can get a lower interest rate than their current rate. Instead of trying to time the market, they should compare rates, fees, and the annual percentage rate from different lenders to find the best deal.
Regardless of what future rate trends may look like, here are some facts to keep in mind when it comes to refinancing:
– Refinancing can usually save you money if the new interest rate is lower than your current rate.
– Refinancing can also help shorten the life of your mortgage, allowing you to pay it off faster.
– Refinancing often involves closing costs and other fees that may offset any savings, so it’s essential to do the math and factor in these costs before deciding to refinance.
In conclusion, the current refinance rates have increased, but they do not necessarily indicate future trends. Therefore, homeowners should focus on making an informed decision about refinancing based on their current financial situation and goals. By comparing rates, fees, and the annual percentage rate from different lenders, homeowners can find the best deal and potentially save money.