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Mortgage rates are the highest in 6 months — is it too late to refinance?

Doug Whiteman
·4-min read
Mortgage rates are the highest in 6 months — is it too late to refinance?
Mortgage rates are the highest in 6 months — is it too late to refinance?

Mortgage rates that were going lower and lower and lower have rapidly bubbled up — to a level not seen in six months, according to a long-running and closely followed weekly survey.

At least one analyst is ready to declare that the days of record-low rates are behind us now.

"The ultra-low rate environment that became the norm in the second half of 2020 appears to have come to an end," says Zillow economist Matthew Speakman.

Does that mean it's too late to get a spectacular rate on a new home, or on a refinance that will reduce your monthly mortgage payment? That's an assumption you don't want to make.

30-year mortgages

Housing and property market concept with graph
reezuan / Shutterstock

The average for a 30-year fixed-rate mortgage shot up last week to an average 2.97%, according to the 50-year-old survey from mortgage giant Freddie Mac.

Rates rose from an average 2.81% the previous week and hit their highest mark since the week ending Aug. 20, according to Freddie Mac's report released on Thursday.

Other surveys are finding even steeper average rates — back above 3%. Mortgage News Daily put the typical 30-year fixed-rate mortgage at 3.27% on Wednesday, up from 3.04% a week earlier, and the Mortgage Bankers Association reported last week that it found rates were averaging 3.08% during the week ending Feb. 19.

A year ago, 30-year rates were at an average 3.45%, Freddie Mac says.

15-year mortgages

Rates also were sharply higher last week for other popular types of home loans, according to the Freddie Mac survey.

The average for a 15-year fixed-rate mortgage loan popped to 2.34%, from 2.21% the previous week. Those shorter-term home loans, which are a popular choice for refinancing, were averaging 2.95% at this time last year.

"Optimism continues as the economy slowly regains its footing, thus affecting mortgage rates," explains Sam Khater, Freddie Mac's chief economist. That optimism has been pumping up the interest on Treasury bonds; mortgage rates follow the yield on the 10-year Treasury, which is the highest in over a year.

5/1 adjustable-rate mortgages

Starter rates on 5/1 adjustable-rate mortgages, or ARMs, skyrocketed last week to an average 2.99%, from 2.77%. One year ago, those ARMs were going for an average 3.20%.

"When combined with demand-fueled rising home prices and low inventory, these rising rates limit how competitive a potential homebuyer can be and how much house they are able to purchase," Khater points out.

The 5/1 ARMs have rates that fixed for the first five years and then can "adjust" — up or down — each (one) year.

Would-be borrowers shouldn't get the wrong idea

Serious African American couple discussing paper documents, sitting together on couch at home, man and woman checking bills, bank account balance, terms of contract, mortgage, loan agreement
fizkes / Shutterstock

"Though rates continue to rise, they remain near historic lows," Khater says. In early January, 30-year fixed-rate home loans hit an all-time-low average 2.65%, and 15-year rates dropped to a record-low 2.16%, on average. Today's rates aren't too far from those valleys.

And, keep in mind that 10 years ago, the benchmark 30-year mortgage rate was averaging around 5%; 20 years ago, it was topping 7%.

Experts say consumers — particularly homeowners with old loans that could be refinanced — shouldn't conclude that today's rates are too high, and shouldn't sit back and hope rates will stage a big retreat.

There's nothing on the horizon that will pull mortgage rates back down to where they were last year or in early January, says Peter Warden, editor of the website The Mortgage Reports. But the current mortgage rates "are at dream levels for most," he writes.

Warden says he expects rates will keep rising in the week ahead, so he's advising borrowers to lock a rate now — whether they plan to close on the loan in seven days or 60.

No, it's not too late for a refi

Interesting game. Joyful nice family playing badminton while being in front of their house
Dmytro Zinkevych / Shutterstock

Rising mortgage rates, along with rising home prices and short supplies of homes, are making things tough right now for many homebuyers, says Danielle Hale, chief economist for Realtor.com. But homeowners don't face those kinds of challenges and still have opportunities to save big by refinancing.

Millions of homeowners remain good candidates to refi and save hundreds of dollars per month, the mortgage technology and data provider Black Knight reported in early February.

You're a "good candidate" if you've got a strong credit score, have at least 20% equity in your home, and could cut your mortgage rate by at least three-quarters of a percentage point (say, go from 3.75% down to 3%).

To get the best rate on a refinance loan, you'll have to shop around. Gather and compare mortgage offers from at least five lenders, because multiple studies have determined five is the magic number for bagging a low rate that will save you thousands over time.

If you find you're a good comparison shopper, those skills also will help when you buy or renew your homeowners insurance. Check rates from multiple insurers to find a good deal on the coverage you need.