With mortgage rates reaching their best levels in about a year, refinancing might finally be heating up again.
It’s been a tough year for refinance activity, with mortgage rates staying stubbornly high for much of 2025.
But mortgage rates finally broke noticeably lower thanks to a terrible jobs report in July coupled with massive downward revisions for June and May.
That pushed the 30-year fixed to around 6.50%, its lowest point of the year and it could move even lower before 2025 closes out.
However, be warned that the same thing happened last year before rates reversed course and lots of homeowners looking to refinance missed out in the process.
There’s No Guarantee Mortgage Rates Will Keep Falling
A year ago, mortgage rates fell from around 7.50% in spring to around 6% by September/October.
The move was driven by the Fed’s pivot from a tightening campaign to a loosening campaign.
In other words, they were no longer hiking rates, and finally talking about cutting rates.
Of course, the Fed doesn’t directly set mortgage rates, so bond traders were simply taking cues from the Fed’s outlook on the economy.
The data was pointing to lower inflation and possibly higher unemployment, which meant monetary policy no longer needed to be so restrictive. That allowed mortgage rates to move lower.
However, everybody got super confused though because once the Fed finally cut in September, mortgage rates went up!
It’s not supposed to work this way! Right? Well, actually it all kind of made sense if you zoomed out.
As noted, mortgage rates came down a ton last year between spring and fall, nearly 150 basis points (bps).
So the Fed’s cut was more than baked in by the time they finally cut, and a sell the news moment may have taken place.
Mortgage rates bounced a bit on the day of the cut. Then they jumped a lot, but it wasn’t because of the Fed. It was because of a hot jobs report nobody expected.
Basically the opposite of the ice-cold jobs report we just saw a week ago.
Then mortgage rates arguably drifted even higher as Trump became the frontrunner to the win the election (his policies like tariffs expected to be inflationary).
Waiting for a Fed Rate Cut to Refinance Your Mortgage?
Anyway, those who were waiting for the Fed rate cut to refinance their mortgage may have gotten burned in the process.
While those who refinanced before the cut were able to snag some solid monthly savings, perhaps lowering their interest rate by 1% or more.
I heard multiple stories from loan officers and mortgage brokers I know who said the borrower waited too long.
They had gotten quoted and the rate was good and the refinance worthwhile. Then they sat on it and missed the opportunity because 6% became 7% again in the span of just over a month.
Basically, they were both misinformed with how mortgage rates work, thinking the Fed controls them, and they were greedy, expecting an even lower rate if they waited.
This is a good reminder of what took place last year and what could happen again. Mortgage rates have been on a nice run of late, but it could all disappear in a flash.
While unemployment data is driving rates lower at the moment, there are still possible headwinds from rising inflation, due to tariffs and also more companies finally raising their prices to reflect today’s realities.
But this isn’t a call to go refinance your mortgage immediately. It still needs to make sense, and there are certainly loan officers and mortgage brokers trying to make questionable loans pencil.
One example I’ve seen lately is UWM’s borrower-paid temporary buydown, which uses the homeowner’s equity to lower payments on the refi.
Or shaving off some minuscule amount in rate to save you a few bucks a month, while possibly also piling on some closing costs.
Be careful when looking at refinance offers to ensure you don’t have some massively long breakeven period where the lower payments finally offset the costs.
To avoid this, you could consider a no cost refinance, where you don’t pay any fees, but accept a slightly higher mortgage rate as a result.
This route could work if mortgage rates do happen to keep coming down, allowing you to refinance again if need be without leaving money on the table.
Read on: 2025 mortgage rate predictions including my own!
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.