Despite the Fed’s first interest rate cut in years, it may be too soon to refinance your mortgage. Here’s why
The Federal Reserve cut interest rates by a half percentage point, or 50 basis points, on Wednesday, its first interest rate cut since March 2020. But homeowners shouldn’t bet on the move as an opportunity to immediately refinance their mortgage.
That’s because “a lot of these rate cuts are already priced in,” Chen Zhao, the economic research lead at Redfin, an online real estate brokerage firm, recently told CNBC.
While mortgage rates are partly influenced by the Fed’s policy, they are also tied to Treasury yields and the economy. Home loan rates have already started to come down in recent weeks, slightly induced in part by favorable economic data and indications the Fed could cut rates.
As of Thursday, the average 30-year fixed rate mortgage in the U.S. was 6.20%, according to Freddie Mac data via the Fed. That’s down from this year’s peak of 7.22% on May 2.
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It can be very difficult to perfectly time a mortgage refinance by looking at mortgage rate activity alone, said Jeff Ostrowski, a housing expert at Bankrate.com.
“It’s almost impossible to figure out what mortgage rates are going to do from week to week or month to month,” Ostrowski said.
Yet there are ways homeowners can determine when a refinance makes the most sense to them, experts say, especially if more rate cuts are slated before the end of the year.
Here’s how to know when it’s time to refinance your mortgage, according to experts.