Refinancing can be useful for homeowners but changing interest rates could impact the market.
Unless you have a fixed mortgage loan, you can count on your interest rate changing throughout the years. Those increasing and decreasing rates, though, can play a role in your financial decisions, such as refinancing. Interest rates have dropped recently, which, in theory, should signal more people to rethink their mortgage. However, as with all mortgage decisions, it is extremely personal and doesn’t make sense for everyone.
“People refinance for many different reasons, including taking out additional equity, taking someone on or off a mortgage or title and bringing the monthly payment or rate down,” says Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage.
How Are Decreasing Interest Rates Changing the Way People Refinance?
As of April 7, 2025, a 30-year fixed refinance has a national average of 6.79%, according to Bankrate. So, it could make sense to refinance, aka swapping a current mortgage for one with better terms. Whether or not homeowners will utilize their ability to refinance heavily depends on what their current rate is.
“Rates are currently lower than they have been in previous years, but for those that have current rates in the 2% to 4% range, they are looking at alternatives to utilize the equity in their home, such as a home equity line of credit or home equity loan,” says Rose Krieger, senior home loan specialist at Churchill Mortgage.
For those with a solid interest rate, a home equity line of credit (HELOC) could be a smarter way to go since you’re borrowing funds against the equity in your home instead of getting a new loan altogether.
Interest Rate Trends in 2025
Interest rates are being affected by many factors, explains Krieger. Between the current unemployment rate, inflation trends, economic growth and Federal Reserve trends, there isn’t just one thing pointing to the market. However, the good news for homeowners is that the general trajectory for interest rates remains down.
It is interesting timing, though, as the tariffs implemented by President Donald Trump (being dubbed “Trump tariffs”) recently went into motion.
“We are experiencing the impacts of the tariffs, which were announced [April 2], in real time,” says DeFlorio. “As of now, that has driven many investors back to the safety of the bond market, bringing yields down, which should mean lower rates. It remains to be seen what the long-term impacts are and banks will be looking for some stability in the markets before making any major changes.”
Refinancing Options
Not happy with your current mortgage loan? You can turn to the best refinance lenders to replace it with a new one. There are different mortgage refinance options, such as a rate-and-term refinance or cash-out refinance. The one for you depends on your financial situation and needs, so this isn’t a one-size-fits-all solution.
The Bottom Line
In an ideal world, we could tell you exactly what to do in your financial situation. However, since finances are highly personal and every mortgage has different terms, your best route is to talk with a professional to see if refinancing is a worthy option. The lower interest rate may look tempting, but the grass isn’t always greener on the other side, so it’s worth taking a 360-degree look.
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Caitlyn Fitzpatrick, the author of this piece, has been an editor and writer since 2014. With a background rooted in commerce journalism, she cares about how readers spend their money. For this story, we talked with Rose Krieger, senior home loan specialist at Churchill Mortgage and Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage. They explained the connection between interest rates and refinancing.
FAQ
Who benefits from increased interest rates?
Banks, insurance companies and brokerage firms reap the benefits. However, that means that potential buyers and sellers may back away for now. “Higher interest rates tend to temper competition, as many people do not have enough purchasing power,” says DeFlorio. “When rates come down, it is expected to bring many buyers and sellers back to the market.”
Does refinancing hurt your credit?
Your aim should always be a high credit score, as it’ll give you access to better rates and programs. Luckily, refinancing shouldn’t affect it much. “With the exception of an inquiry, which should have a very limited impact if managed properly, there really is no risk to your credit score from refinancing,” says DeFlorio.
How much should an interest rate change to refinance?
As with most homeowner tools, this will vary depending on the individual and their financial situation. So, dive into your numbers to see if it makes sense. “The short answer is that most homeowners refinance when there is a 1% difference relative to their current rate. To go more in depth, the homeowner will want to leverage the monthly savings against the cost to refinance,” says Krieger.
Sources
- Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage
- Rose Krieger, senior home loan specialist at Churchill Mortgage
About Caitlyn Fitzpatrick
Caitlyn Fitzpatrick has been a professional writer and editor since 2014 and entered the commerce journalism world in 2017. She’s passionate about helping readers make smart buying decisions by using data insights and interviewing experts. Most recently, Fitzpatrick was the Senior Shopping Editor at Trusted Media Brands, where she led affiliate content on Reader’s Digest. In addition to Benzinga, Fitzpatrick’s work can be found in a range of publications, including U.S. News & World Report’s 360 Reviews, Today’s Parent, Betches, WhatToWatch.com, PS (formerly Popsugar), and more.
