After consistently trending downward since the government shutdown began on Oct. 1, 30-year mortgage rates have officially fallen to the lowest point this year, below 6.5%. At various points in 2025 and 2024, rates crossed above the 7% threshold, with rates nearly reaching 8% in 2023.
In other words, people who bought a home within the past few years might now have the opportunity to refinance to a lower mortgage rate. And data suggests that recent homebuyers are doing just that. Refinance activity is up 81% compared with the same time period last year, according to the Mortgage Bankers Association.
“The refinance index increased 4% (week over week), driven by a 6% increase in conventional refinances and a 12% increase in FHA refinance applications, as borrowers remain attentive to these opportunities to lower their monthly mortgage payment,” Joel Kan, MBA’s vice president and deputy chief economist, says in a statement.
Homeowners may be able to lower their monthly payments and get out of debt faster by refinancing to a lower rate, but there are a few things to consider before you apply for a mortgage refinance.
It May Be a Good Time to Refi — Especially If You Do This
Although mortgage rates have fallen to their lowest levels this year, some homeowners may still be hesitant to refinance. If this sounds familiar, you may be wondering: Is there room for mortgage rates to fall further?
Deciding whether to refinance your mortgage can be a difficult task, but it’s even harder to predict future mortgage rate trends. Most forecasting groups expect mortgage rates to stay above 6% for the next several years, with the exception of Fannie Mae, which expects rates to average 5.9% at the end of 2026.
No economist has a crystal ball, and even the most accurate forecasters get it wrong sometimes. That’s especially true when trying to predict economic trends several years out, with many factors influencing where mortgage rates could be in 2027, let alone 2026.
If you’ve been waiting for sub-6% mortgage rates to refinance your home loan, you could be waiting for a long time. That is, unless you’re willing to consider a shorter mortgage term.
U.S. News data shows that the average 15-year mortgage rate is slightly below 5.5% this week. That’s about a full percentage point lower than the typical rate on a 30-year mortgage, which can translate to tens of thousands of dollars in interest savings over time.
[SEE: Current Mortgage Refinance Rates]
But it’s not just lower mortgage rates that drive the long-term savings on a 15-year mortgage. Fewer monthly payments mean fewer overall interest payments and the opportunity to pay down the loan’s principal balance much faster. It’s just how mortgage amortization works.
Of course, the primary drawback of a shorter repayment term is that the monthly payments are much, much higher. If you’re repaying a $300,000 mortgage at a 6.5% rate over 30 years, the monthly principal and interest payments are $1,896. Change that to a 5.5% rate over a 15-year term, and the payments rise to $2,451.
However, let’s say you’ve found your forever home and don’t plan on moving or selling for the rest of the repayment period. If you kept the same loan terms for the duration of the loan, you’d save more than $240,000 over time and get out of debt 15 years faster. You can use a mortgage calculator to play around with the numbers for yourself.
Of course, there are many variables that go into the decision to refinance in the first place. You’ll want to calculate your break-even point, which is the time it takes for the monthly interest savings to offset the up-front closing costs. It also helps to have a trusted loan officer or third-party financial advisor to help guide you through the process.
[Read: Best Mortgage Refinance Lenders.]
More from U.S. News
When Will Mortgage Rates Go Down? The Answer’s Not As Simple As You Think
Mortgage Rate Too Good to Be True? Read the Fine Print
Mortgage Rates Drop As Government Shutdown Drags On
Falling Mortgage Rates Spur Refinance Boom — Is It Time to Refi? originally appeared on usnews.com
