Weekly Mortgage Rates Trickle Down; Refinances Are on the Rise
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Mortgage interest rates have fallen to their lowest point since mid-December, and have remained under 7% for the third consecutive week.
The average rate on a 30-year fixed-rate mortgage fell 11 basis points to 6.81% the week ending Feb. 6, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.
It’s better, but not terribly exciting for potential borrowers who were hoping 2025 would bring lower mortgage rates than 2024; we saw rates hovering around 6% back in September.
Refinances push mortgage applications upward
Weekly mortgage applications increased 2.2% in the week ending Jan. 31, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey released Feb. 5. While purchase applications decreased slightly, more borrowers are choosing to refinance. This comes after the 30-year mortgage rate dipped to its lowest point in six weeks, said Joel Kan, MBA vice president and deputy chief economist.
“Mortgage applications responded to these lower rates and were up for the week overall, driven by a 12% increase in refinance applications, which had their strongest week since December 2024,” said Kan in a press release.
Among all mortgages originated last week, 39% were refinances, up from 37.1% the previous week.
Mortgage rates are unlikely to see major drops any time soon, as economic markets wait to see what comes of the Trump administration’s sweeping actions. So, knowing that there may not be better deals to hold out for, should you refinance now?
It depends on how much you’ll actually save and how long you plan to stay in the home. Let’s say you got a $300,000 mortgage in October 2023, when the average 30-year rate was 7.74%, and you can refinance today to a 7% rate. Assuming you pay $12,000 (roughly 4%) in closing costs, you’ll break even after about five and a half years and reduce your monthly payments by about $175. You’ll save more than $25,000 over the life of the loan.
Could economic uncertainty fuel cash-out refinances?
Even if rates aren’t significantly lower now for many borrowers, they're not the only deciding factor for a refinance. For those who want to take advantage of equity gains, cash-out refis offer a way to turn home equity into spending money without getting a second mortgage or dealing with the risks of a variable rate.
As of the third quarter of 2024, the average homeowner had gained about $5,700 in equity year over year, according to data from CoreLogic. Homeowners in Northeastern coastal states saw average gains ranging from $18,000 to $43,000.
The thing about debt is that a lot of it — namely credit card debt — is set at a variable rate. In January 2025, a report from the Consumer Financial Protection Bureau found that the most common reason for getting a cash-out refinance over the past decade was to “pay off other bills or debts,” with the average cash-out refinance borrower carrying about $13,000 in credit card debt and over $61,000 in home equity line of credit (HELOC) debt.
As news stories about the Trump administration’s policies reach a fever pitch throughout his first weeks in office, fears about the economy could prompt some homeowners to pay down debts with the most potential volatility. For homeowners who can net a lower interest rate by paying off debts with equity, the up-front costs of a cash-out refinance could be worth it.
