Weekly Mortgage Rates Drop; Time to Knock on the Refinancing Door?

Mortgage rates dropped to their lowest level in more than a year as the Federal Reserve cut short-term interest rates this week. The rate decline offers a refinancing opportunity for some homeowners.

The average rate on a 30-year fixed-rate mortgage fell five basis points to 6.01% APR in the week ending Oct. 30, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

This week's average rate was the lowest since the week of Sept. 19, 2024, when it averaged 5.89%. More importantly, current rates are substantially lower than in several periods over the past two years. Borrowers with mortgages from those eras might benefit from refinancing to a lower interest rate.

What the Fed's got to do with it

The Federal Reserve's monetary policy committee tries to steer the economy without swerving into high inflation or skidding into a recession. When inflation rises, the Fed raises short-term interest rates to dampen the economy. When jobs are hard to find, the Fed cuts short-term interest rates to stimulate the economy.

In recent months, the central bank has U-turned from inflation-fighting mode to unemployment-fighting mode. The Fed reduced the overnight federal funds rate Oct. 29, after also cutting the rate in September. Each reduction was a quarter of a percentage point. Investors predicted those rate cuts were coming, so in the lead up to each meeting, mortgage rates barreled downhill and beat the Fed at the bottom.

What it means for refinancers

Plenty of people have bought homes at higher-than-comfortable mortgage rates in the last few years, intending to refinance into lower rates eventually. For some, that time has arrived.

The 30-year mortgage rate has fallen more than a percentage point since May, when it averaged 7.07% in the week ending May 29, according to NerdWallet's rates tracking. It was higher than 7% from August through November 2023, as well as in much of April and May 2024.

Though a 6% mortgage rate might not sound “low,” refinancing from 7% to 6% can save a lot of money. Monthly payments would be about $230 lower on a $350,000 mortgage, for example — saving more than $80,000 over the life of the loan.

You can plug your own numbers into a refinance calculator.

Refinancing steps

Think those refi numbers are looking pretty good? You're even more likely to get a great deal on a mortgage when you apply with at least three lenders. After you file a formal application, the lender must provide a Loan Estimate — a three-page document with details about the interest rate, loan fees and monthly payment. Compare loan estimates to identify the best deal.

When you know how much you'll pay in loan fees, you can calculate your break-even point. That's how long it takes for the accumulated monthly savings to exceed the fees you paid to refinance the loan. Then you can decide whether to proceed, and with which lender.

The refi window could close at any time

Mortgage rates are unpredictable, and they don't always move in the same direction as the Fed's rate policy.

For example, mortgage rates bounced higher in the hours after the Oct. 29 Fed announcement. They rose because Fed Chair Jerome Powell emphasized that the central bank isn't committed to cutting short-term rates again at the December meeting.

In a news conference, Powell said a December rate cut "is not a foregone conclusion. Far from it. Policy is not on a pre-set course."

That surprised the mortgage market, which might have assumed a December rate cut was a done deal. "So when Jerome Powell came out and said, 'Wait, not so fast…we're going to wait and see exactly what the data says about unemployment and inflation,’ that gave markets some pause," said Daryl Fairweather, chief economist for Redfin, in a video posted on Bluesky.