Mortgage rates pull back a bit, and the refi window widens

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Mortgage rates fell slightly this week, a retreat that reminds homeowners of the urgency of refinancing their home loans before rates start moving up.

The average cost of a 30-year fixed-rate mortgage ticked down to 3.18 percent from last week’s 3.19 percent, according to Bankrate’s national survey of lenders. Rates reached a record low of 2.93 percent in January. The 15-year fixed-rate mortgage also fell, falling to 2.44 percent from last week’s 2.48 percent.

Bankrate includes origination points and other fees in its figure. The 30-year fixed-rate loans in this week’s survey included an average total of 0.3 discount and origination points.

Before last week’s bounce, rates had fallen for five consecutive weeks in Bankrate’s survey. Rates remain historically low, creating an opportunity for millions of American homeowners who still could benefit from refinancing.

“The single biggest thing most households can do to take advantage of low interest rates is for homeowners to refinance their mortgages,” says Greg McBride, Bankrate’s chief financial analyst. “Reducing the monthly payments in a meaningful way can create a pathway to accelerate debt repayment or breathing room to boost savings.”

Mortgage rates plummeted after the coronavirus recession struck in the spring of 2020, a trend that helped drive the surprisingly strong housing market. The upward trend in mortgage rates reflects signals of an economic turnaround.

While rates have risen from their record lows, many homeowners are just now refinancing, says Bill Dallas, president of Finance of America Mortgage. The delay is understandable — a large swath of Americans just felt too jittery during last year’s recession to worry about refinancing.

“There were a lot of other issues that people were focused on — COVID, their job, their family,” Dallas says. “Refinancing was probably down there at No. 3 or 4. If your job is more settled, you’re more able to focus on refinancing, versus last year when everyone was panicking.”

Meanwhile, home prices have risen robustly during the pandemic, and rock-bottom mortgage rates helped push home values higher. For homebuyers, and especially first-time buyers, rising prices pose an affordability challenge.

In one sign the rates could resume their rise, the 10-year Treasury yield, a key indicator for mortgage rates, has more than doubled in recent months. With Democrats taking control of the White House and Congress, a generous stimulus bill has been enacted — and more government spending could be coming.

Mortgage experts polled by Bankrate are evenly divided about where rates will go in the coming week.

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Written by
Jeff Ostrowski
Senior mortgage reporter
Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.
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