Mortgage Refinance Rates Drop to Lowest Level Since December 2023

Rates on 30-year mortgage refinance loans fell another 6 basis points on average Wednesday, for a three-day decline of almost half a percentage point. That reduces the 30-year refi average to 6.66%, its cheapest level since Dec. 27, 2023.

Rate movement was flat to slightly down for most refinance loan types Wednesday, with the 15-year and 20-year refi averages falling slightly. The jumbo 30-year refinance average, meanwhile, saw a bigger decline.

Since rates vary widely across lenders, it's always wise to shop around for your best mortgage refinance option and compare rates regularly, no matter the type of home loan you seek.

Calculate monthly payments for different loan scenarios with our Mortgage Calculator.

What Causes Mortgage Rates to Rise or Fall?

Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as:

• The level and direction of the bond market, especially 10-year Treasury yields
• The Federal Reserve's current monetary policy, especially as it relates to bond buying and funding government-backed mortgages
• Competition between mortgage lenders and across loan types

Because any number of these can cause fluctuations at the same time, it's generally difficult to attribute any single change to any one factor.

Macroeconomic factors kept the mortgage market relatively low for much of 2021. In particular, the Federal Reserve had been buying billions of dollars of bonds in response to the pandemic's economic pressures. This bond-buying policy is a major influencer of mortgage rates.

But starting in November 2021, the Fed began tapering its bond purchases downward, making sizable reductions each month until reaching net zero in March 2022.

Between that time and July 2023, the Fed aggressively raised the federal funds rate to fight decades-high inflation. While the fed funds rate can influence mortgage rates, it doesn't directly do so. In fact, the fed funds rate and mortgage rates can move in opposite directions.

But given the historic speed and magnitude of the Fed's 2022 and 2023 rate increases—raising the benchmark rate 5.25 percentage points over 16 months—even the indirect influence of the fed funds rate has resulted in a dramatic upward impact on mortgage rates over the last two years.

The Fed has been maintaining the federal funds rate at its current level since last July, with an eighth consecutive rate hold announced on July 31. Although inflation has come down considerably, it's still above the Fed's target level of 2%. Until the central bank feels confident inflation is falling sufficiently and sustainably, it has said it's hesitant to start cutting rates.

The Fed will hold three more meetings this year, with the next one scheduled to conclude Sept. 18.

How We Track Mortgage Rates

The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.