Mortgage interest rates have dropped to the lowest since mid-December, staying below 7% for the third straight week. The average rate for a 30-year fixed-rate mortgage fell to 6.81% in the week ending Feb. 6, as per Zillow. Mortgage applications increased by 2.2% in the same week, mainly driven by a 12% surge in refinance applications. Lower rates have encouraged more borrowers to refinance, with 39% of all mortgages last week being refinances.
Despite uncertainties in the economy with the Trump administration’s policies, homeowners are considering cash-out refinances to take advantage of equity gains. Many borrowers are looking to pay off credit card debt or HELOC debt by refinancing, especially as interest rates remain low. The average homeowner gained about $5,700 in equity in the third quarter of 2024, with homeowners in certain states seeing gains of up to $43,000.
With mortgage rates not expected to see significant drops soon, it may be a good time to refinance for those looking to save money in the long run. While the upfront costs of a cash-out refinance can be significant, the potential savings over the life of the loan make it a viable option for those looking to pay off debts with the most potential volatility.
Overall, the housing market is experiencing an uptick in refinances as homeowners take advantage of lower rates and increased equity gains. The potential for economic uncertainty may prompt more borrowers to consider refinancing as a way to save money and pay down debts with higher interest rates.
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