More homeowners are submitting their refinancing applications. However, with rates still above 6%, many are standing on the sidelines waiting for rates to drop lower before trading their existing loans for a new one.
Mortgage rates have dropped to their lowest level in 2025. But with rates still hovering above 6%, is refinancing on the rise, or are homeowners waiting for refinance rates to dip even further before making a move?
The decision to refinance isn’t always clear-cut, but understanding the market can help you make a more informed choice. We interviewed experts to break down the latest refinancing trends.
What is Refinancing?
Refinancing, or refi for short, is the process of replacing an existing loan with a new one. The new loan typically has more favorable terms, like lower rates, or may offer better features.
If you want to refinance your mortgage or other types of loans, you’ll have to contact your existing lender or a new one and fill out a new loan application. Since you’re essentially taking out another loan, you must go through the underwriting process again and pay closing costs, typically between 2% and 6% of the new loan amount.
Key Factors Affecting Refinancing in 2025
Here’s what’s shaping the refinancing market in 2025:
- Mortgage rates: Refinancing could make sense for homeowners if rates have dropped since they first took out their mortgage.
- Inflation: If inflation remains elevated, the Fed is less likely to cut rates, keeping borrowing costs high.
- Federal Reserve policies: Future rate cuts could spark a wave of refinancing, but there’s no guarantee of when or if that will happen.
- Economic uncertainty: Fears of a recession and economic uncertainty may keep many homeowners on the sidelines.
Experts' Insights on the Refinancing Landscape
Here’s what experts say about the refinancing landscape and the factors driving homeowners' decisions.
Economic Factors Impacting Refinancing Decisions
“Mortgage rates have improved over the past couple of months because the yield on 10-year Treasury bills has dropped. This signals the loss of confidence on the part of global investors,” says Sebastian Frey, a licensed Real Estate Broker and REALTOR® with Compass. “If in fact the U.S. economy does dip into a prolonged and deep-ish recession, I think we’ll see mortgage rates drop into the 5s and even possibly the 4s.”
He believes this would have a dramatic effect on the refi market, causing a rush to refinance even as the economy slips into negative territory.
How Mortgage Rates Are Shaping Refinancing Trends
Mortgage rates dropped to their lowest level in 2025, which means more homeowners are gearing up to refinance their homes and take advantage of lower interest rates. According to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Feb. 28, 2025, refinance activity was at its fastest pace since October 2024. Conventional refinance applications were up by 34%, and government refinance applications jumped by 42% over the week.
That said, with current rates above 6%, few homeowners could benefit from a refinance given the current rate and cost. So, even though the percentage increases may seem quite drastic from week to week, the volume isn’t as significant.
“While some borrowers are considering refinancing, many are still holding off in anticipation of potential future Fed rate cuts,” says David Druey, Florida regional president for Centennial Bank. “However, if the Fed lowers rates again, we could see more refinancing activity in the coming months.”
The Role of Inflation and Federal Reserve Policies
According to Druey, homeowners typically refinance when they see a clear financial benefit, but inflation creates uncertainty, making many hesitant to act.
“If inflation remains above 2%, the Fed is unlikely to lower rates, which will keep borrowing costs elevated,” Druey says. This means fewer homeowners will be willing to refinance as they won’t financially benefit much from it. However, if inflation stabilizes, the Fed may cut rates to stimulate the economy, and more people may refinance their homes.
The Bottom Line
Refinancing is picking up, but not all homeowners are ready to get off the sidelines yet. If you’re not sure what you want to do, take the time to run the numbers and consult with a trusted refinance lender or financial advisor. If refinancing saves you money in the long run, it could be worth it. Otherwise, you may want to hold out for better opportunities.
Why You Should Trust Us
Around 25 million readers monthly trust Benzinga for in-depth financial coverage, including mortgages, investing and other personal finance topics. Our commitment to thorough research and expert-backed insights has solidified our reputation as a go-to resource for financial information.
Jamela Adam, the author of this piece, has been a personal finance writer since 2021. She’s also a Certified Financial Education Instructor. To provide expert perspectives on refinancing trends in 2025, we spoke with David Druey, Florida regional president for Centennial Bank, and Sebastian Frey, Licensed Real Estate Broker and REALTOR® at Compass.
FAQ
Are refinances on the rise?
Yes. Refinances are rising, but many homeowners are still holding off since recent rate drops haven’t been significant enough to justify replacing their existing loan with a new one.
At what percentage should you refinance?
Some financial advisors suggest refinancing if you can shave at least 1% to 2% off your current rate. So, if you took out a 7% mortgage, it could make financial sense to refinance when rates drop to 6% or lower.
Why are my closing costs so high on a refinance?
Closing costs are typically anywhere from 2% to 6% of your loan amount. So, if your loan amount is high, your closing costs won’t be cheap. Your credit score and loan type can also affect closing costs. If closing costs are higher than you’d like, negotiate with lenders or shop around for better terms.
Sources
- Sebastian Frey, Licensed Real Estate Broker and REALTOR®, Compass https://www.compass.com/agents/sebastian-frey/
- David Druey, Florida Regional President, Centennial Bank https://www.linkedin.com/in/david-druey-88b1392b/
- Mortgage Bankers Association, Weekly Mortgage Applications Survey, Feb. 28, 2025 https://www.mba.org/news-and-research/newsroom/news/2025/03/05/mortgage-applications-increase-in-latest-mba-weekly-survey
- Federal Reserve, Monetary Policy Report 2025 https://www.federalreserve.gov/
- Freddie Mac, Primary Mortgage Market Survey (PMMS) https://www.freddiemac.com/pmms
About Jamela Adam
Jamela is a certified financial education instructor (CFEI) with a background in covering mortgages, home buying, and real estate financing. She specializes in breaking down complex topics like mortgage rates, home loan options, and market trends to help readers make smarter decisions with their homes.