Today’s Refinance Rates December 23, 2024: Rates Climb to 6.96% (2025)

Key Takeaways

• The current average refinance rate on a 30-year fixed ReFi is 6.96%, compared to 6.74% a week earlier.
• For borrowers who want a shorter ReFi, the average rate on a 15-year fixed ReFi is 6.22%, up 16 percentage points from the previous week.
• Refinancing your mortgage is when you take out a new home loan and use it to pay off your existing mortgage, either with your current lender or a new lender.

Vault’s Viewpoint: ReFi Rate Trends for 2024

Signs continue to point in the right direction for people looking to refinance. The Mortgage Bankers Association (MBA) previously predicted a 56% increase in refinance volume in 2024. And Joel Kan, deputy chief economist at the MBA noted in a press release that “refinance applications have improved from their recent low point and have been showing year-over-year gains, albeit at low levels.”

While mortgage rates are expected to continue dropping in 2024, it’s unlikely they’ll fall to the historic lows seen in 2020 and 2021 when the average mortgage rate was 2.96%.

During that time, borrowers with 30-year fixed-rate mortgages who took advantage of non-cash-out refinances to move into another 30-year fixed-rate mortgage were able to save about $2,700 in mortgage payments annually according to Freddie Mac Trends in Mortgage Refinancing Activity.

For 2024, Realtor.com predicts rates will average 6.8% for the year and end around 6.5%. This is slightly higher than the MBA’s prediction of 6.1% at the end of 2024. You may want to wait if you’re on the fence about refinancing right now. With the Federal Reserve expected to cut rates later this year, mortgage rates could fall slightly further from where they are now.

The Federal Reserve and Refinancing a Mortgage

The Federal Reserve is expected to cut interest rates sometime in 2024. And when the Fed cuts rates, it ripples throughout the economy, including with mortgage and refinancing interest rates.

The Federal Reserve doesn’t directly set refinancing rates, but mortgage rates tend to increase when interest rates increase. When the Fed cuts rates, home loan interest rates tend to fall. Whether you’re looking to get a traditional refinance or even a cash-out refinance, see what today’s best refinancing rates offer and if you should refinance your mortgage right now.

How Does a Mortgage Refinance Work?

Refinancing your mortgage is when you take out a new home loan and use that loan to pay off your existing home loan. Then you’ll make payments on your new mortgage, along with its new repayment terms and interest rate.

You’re replacing your current home loan with a new one. But the process of repaying your loan stays the same. Sometimes you can refinance with the same lender who has your current home loan. Or you can refinance with another mortgage lender.

Refinancing is similar to taking out a traditional mortgage in that you’ll pay closing costs. This can be 3% to 5% of your total loan and you’ll pay that upfront.

Why Should You Refinance Your Mortgage?

Refinancing your mortgage could mean you lower your monthly payments if you can secure a lower interest rate than what you’re paying now. Paying less each month means more money in your pocket to pay for other needs, whether that’s saving up for an emergency fund, retirement, or even an upcoming trip.

Common reasons to get a new mortgage include:

• To obtain a lower interest rate than what you’re paying now
• To switch from an adjustable-rate mortgage (ARM) to a fixed-rate one, or vice-versa
• To get longer loan terms to lower your monthly payments
• To get shorter loan terms to pay off your loan sooner
• To cash in on your home’s equity through a cash-out refinance
• To switch mortgage lenders from the one you have now

Pros of Refinancing

Refinancing has a lot of upsides, including:

• Potentially lowering your interest rate from what you pay right now
• Possibly lowering your monthly payment
• Changing your interest rate type or loan terms

Cons of Refinancing

There are some downsides to refinancing, including:

• Closing costs can be expensive
• You’re not guaranteed a lower interest rate
• Longer repayment terms mean more payments and more interest over the life of your mortgage

How to Refinance Your Mortgage

Refinancing your mortgage is similar to getting a traditional home loan, but it does have some variations.

1. Figure out your new potential payments. Use your goals as a way to determine what your new monthly payments will be and if they’re affordable. For instance, if you’re taking out a new 30-year loan, how much do you want to lessen your monthly payments to? If you’re trying to pay off your home sooner, what will a 15-year term look like? Take some time to play around with numbers until you find a comfortable range.
2. Shop around. See which lenders offer the lowest interest rates, fewest fees, and repayment terms you’re comfortable with. You’ll probably need to complete a few preapproval applications to get a comparison. But if you do this within a few days or a couple of weeks of each other, your credit score shouldn’t take more than one hit since credit bureaus typically group these credit checks and count them as one.
3. Choose a lender. Once you’ve got a few approvals in hand, go with a lender that fits your needs and offers you the best conditions. Complete any necessary paperwork and try to lock in your rate in case there’s a rate increase before you close on your loan.
4. Submit your application. Complete your official loan application and provide any additional paperwork required. This could be pay stubs, tax returns, bank statements, copy of government-issued IDs and more.
5. Close on your loan. Once your application gets approved, it’s time to close on your loan. That means signing the final paperwork and paying closing costs. From here, your new lender will pay off your previous home loan and you’ll get set up with your new refinanced loan account.