Mortgage refinance rates going into 2023

Written by Jamie Young / December 22, 2022
Reviewed by Ashley Harrison

Sadly, those rock bottom refinance rates from 2020 and 2021 are long gone. Even so, refinancing your mortgage could still make sense if you want to switch to a shorter-term loan or need to tap into your home equity.

If you’re ready to refinance your mortgage, here’s how rates are trending and how to get the best rate on your home loan.

Inside this article

  1. Current mortgage refinance rates
  2. What the experts are saying about mortgage refi rates
  3. How to get the best mortgage refinance rate
  4. Frequently Asked Questions

Current mortgage refinance rates

As of December 16, the average annual percentage rate (APR) for a 30-year refinance rate is 6.51%. This is down only slightly from 6.53% the week before.

The average rate of a 15-year mortgage refinance is 5.91%, exactly the same rate as the week prior.

While fixed rates are showing signs of cooling, adjustable-rate mortgages (ARMs) may offer a more affordable option. The average 5/1 ARM refinance rate is currently 5.23%, down slightly from 5.29% the week before.

What the experts are saying about mortgage refi rates

In its battle against high inflation, the Federal Reserve plans to forge ahead with its tightening policy into 2023, which will continue to indirectly impact fixed-rate refinance loans. While yields on Treasury bonds have a direct impact on mortgage rates, the Fed’s monetary actions and inflation have an indirect influence.

As a result, many experts predict that mortgage rates will stay elevated in 2023. For instance, Freddie Mac forecasts rates will remain above 6%, dropping from the average rate of 6.8% in the fourth quarter of 2022 to 6.2% in the final quarter of 2023. 

On the other hand, some experts have a more rosy outlook.

“Based on what I’m seeing in the market in terms of curbing inflation, I would suspect that in the spring of 2023, rates will decrease to [the] 4.5% to 5.25% range,” says Stephen Rinaldi, president of Rinaldi Group LLC.

How to get the best mortgage refinance rate

If you plan to refinance, Carol Toren, senior vice president and head of consumer direct lending at Flagstar Bank, advises borrowers to consider various factors to secure the best rate. 

“Loan term, loan amount, loan-to-value ratio and loan product are key,” says Toren. “For example, you'll typically pay a lower interest rate on a 15-year mortgage than you would for a 30-year fixed-rate loan, and all other things being equal, the less you refinance, the less costly your refi will be.” 

Here are five steps to get the best mortgage rate:

  1. Get familiar with your credit score. A stronger credit score can go a long way to reducing rates—improving your credit by even a few points can make a difference. Before you apply, check your credit report to make sure it doesn’t contain any errors. If it does, removing these from your history could help lift your score. Other potential ways to improve your credit include paying all of your bills on time and repaying debt. 

  2. Compare multiple lenders. Don’t go with the offer of the first lender you see. Make it your mission to get quotes from several lenders. Comparing different lenders’ rates, fees and other loan features could save you money in the long run.

  3. Increase your down payment. The lower your loan-to-value (LTV) ratio—the amount you owe on your mortgage divided by your home’s appraised value—the better your chance of getting a lower rate. Lenders generally view loans at or near the appraised value of a home as a higher risk. An LTV ratio above 80% is usually considered high, so it’s a good idea to start saving for at least a 20% down payment to avoid greater overall costs.

  4. Choose a shorter term. Typically, the shorter the loan term, the lower the interest rate. However, the downside of shorter-term loans is that the monthly payments are higher, so review your total monthly debt obligations and income first to see if you can manage to pay more each month.

  5. Ask lenders about “buying down” your rate. Most lenders give borrowers the option to “buy down” their rate through discount points. One point equals 1% of your loan and typically reduces your rate by 0.25%. So for example, if your refinance balance is $300,000 at 5.75% interest and you buy one point, you could pay $3,000 at closing to buy down to a 5.50% rate. Make sure to do the math beforehand to determine if you’ll be in the home long enough to recoup the cost.

Frequently Asked Questions

What are the different types of refinance loans?

There are three major types of mortgage refinancing loans:

  • Rate-and-term refinance: With this kind of loan (also known as a no cash-out refinance), you can change the rate, term or both of your current loan. For example, you might choose this type of loan due to a drop in interest rates.

  • Cash-out refinance: This lets you replace your current loan with a new, larger loan while pocketing the remainder with a lump-sum payment to use how you wish. Cash-out refinancing typically has higher interest rates and requires a better credit score to qualify since there’s greater risk to the lender.

  • Streamline refinance: If you have a loan backed by the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA) or Department of Veterans Affairs (VA), this could be an option for you. Unlike a typical refinance, a streamline refinance involves less paperwork and generally doesn’t require a new home appraisal. However, borrowers are required to pay an upfront fee and annual mortgage insurance premium (MIP) fees.

Mortgage rate vs. APR: What’s the difference?
Is it better to refinance with your current lender?
Should I switch to an adjustable-rate mortgage?

About the Authors

Jamie Young

Jamie Young

Jamie Young is an authority on personal finance who has been writing and editing for online media for 10 years. Her work has appeared on some of the best-known media outlets including Forbes, Time, CBS News, Huffington Post, Business Insider, AOL, MSN, and more.

Jamie is passionate about finance, technology, and the Oxford comma. In her free time, Jamie takes care of her two crazy cats and ever-growing collection of plants. She’s also an avid gamer who watches way too many true crime documentaries. 

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Ashley Harrison

Ashley Harrison

Ashley is a personal finance authority who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand, and her work has appeared on Forbes Advisor, Credible, Fox, and Student Loan Hero.

Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, you can find her drawing, scaring herself with spooky stories, playing video games, and chasing her black cat Salem.

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