Mortgage rates have made a 'substantial improvement,' economist says — here’s what to know

The Good Brigade | Digitalvision | Getty ImagesMortgage rates have been declining, making conditions favorable for some owners to refinance, experts say

The average 30-year fixed rate mortgage was 6.58% for the week ending Thursday, August 14, down from 6.63% the week prior, according to Freddie Mac.Mortgage rates have come down a point and a half from October 2023, when rates almost hit 8%, according to Jessica Lautz, deputy chief economist at the National Association of Realtors. "That's a substantial imvement," said Lautz.More from Personal Finance:Nearly 1 in 5 older student loan borrowers are seriously delinquentHere's the inflation breakdown for July 2025Bad credit triggers a 'subprime tax,' Bankrate saysLower mortgage rates often result in lower borrowing costs for loans

Many owners have already jumped on the opportunity. "Refinance applications increased to their strongest pace in four weeks," Joel Kan, the Mortgage Bankers Association's vice president and deputy chief economist, said in an Aug. 6 report

The of refinance applications increased to roughly 42% of total applications, the highest level since April, per the findings.While most owners have mortgage rates that are too low to benefit, 18.8% of outstanding mortgages have interest rates of 6% or higher, according to Realtor.com.owners who bought their perties in recent years when rates were high may want to consider refinancing, experts say. "A much more common mistake is for people to not realize when rates have dropped that they had an opportunity to refinance and to take advantage of it," said Chen Zhao, head of economics re at Redfin

Why mortgage rates have been decliningMortgage rates have been declining in recent months

Yet, mortgage rates don't the federal funds rate set by the central bank

Instead, they closely track the 10-year Treasury yields, which have been declining because of recent weakness in economic data, according to experts."The bond market is super sensitive and it reacts immediately to the data," said Melissa Cohn, the regional vice president of William Raveis Mortgage.watch now14:1814:18perty Play: Developer’s bet on affordable housing that's sustainable, scalableCNBC perty PlayThere's a possibility that the Fed cuts interest rates in September, but the bond market may have already priced in that decision, said Zhao

Overall, experts agree that it's worth paying attention to where rates are, to spot opportunities to refinance. "People should start paying attention to where rates are going," said Cohn

However, before you start the cess, consider your plans: Refinancing makes more sense if you expect to in or own the perty for a few more years.That's because refinancing a mortgage is not free — there are closing costs and certain fees that come with it, and you'd want to amortize the costs over the term that you expect to be in your , said Cohn.If you plan to keep the for more than a year, refinancing makes sense

But if you plan to list your house for sale in the next six months, it may not be worth it, said Zhao.Generally, refinancing costs will depend on where you and the size of the loan, experts say.You can expect to pay between 2% to 6% of the new loan balance, according to Bankrate

You also want to make sure rates have "dropped sufficiently" for you to see real savings from the refi, said Cohn

There are different rules of thumb of what's considered to be "in the money," or when rates have come down enough

But typically, if interest rates are 50 basis points lower than your current rate, you should look into it, Zhao said.If it's more than that or a full percentage point lower, "you should almost certainly refinance," she said.