Experts suggest looking at refinancing, entering housing market as interest rates drop

The long-term average mortgage rate reached its lowest level in nearly a year, dropping from 6.5% to 6.35% on Thursday. The last time it was this low was in October of 2024.

The decrease comes as the housing market continues to be busy in the Twin Cities.

“It’s been more active this year than in years past,” said Jane Kahnke, a realtor and real estate agent with the Odd Couple Team. “I expect we’ll see a more active second half of the year based on this change.”

Interest rates for a 30-year fixed mortgage were close to 8% at the peak in 2023. There’s been a downward trend since then, with rates nearing 6% last September before climbing and dropping again.

“What I see when rates come down, prices go up, so if you’re buying, it makes sense to buy now and then refinance rather than waiting,” said Kahnke.

Some homeowners are currently considering refinancing rather than selling their property. The decision to do so involves a number of factors.

“It’s really a personal decision,” said David Jamison, the founder of Rainbow Mortgage.

He suggests people who bought a home in late 2022 or early 2023 look at refinancing.

“Those are the people that really need to reach out because they may be able to save a lot of money,” said Jamison, who said the cost of financing also should be considered. “If we can recoup the hard fees in 24 to 36 months, then I recommend that people look at it.”

The time a homeowner plans to spend in the house is also a factor.

“If you’re only going to stay in the house for one or two years, it’s probably not worth the money to do the refinance unless that amount of money is the difference between eating and getting gas to go to work, that sort of thing,” he said.

Jamison also warns about offers of free refinancing from mortgage lenders.

“People need to be really careful about that,” he said. “Because usually what happens is you’re not getting market rate. What they’re doing is they’re not charging you any cost, but what they’re doing, though, is they’re charging you a slightly higher rate to absorb all of those costs, so it’s not technically free.”

He suggests reaching out to a second lender to verify the rate being offered is market rate.