How Do 30-Year Cash-Out Mortgage Rates Today Compare?
Published July 8, 2022
A cash-out refinance offers a variety of financial benefits, but your interest rate can have a dramatic impact on how much you pay over time. If the current 30-year cash-out mortgage rates are higher than your original interest rate, your monthly payment could increase substantially. Understanding how today's 30-year cash-out mortgage rates compare to previous rates can help you determine whether now is the right time for you to refinance.
Are today's 30-year cash-out mortgage rates high or low?
Mortgage rates are constantly fluctuating, and there are several individual and market-based factors that determine your rate. While you'll probably get a lower interest rate if you have strong credit history and a large down payment, homebuyers are always subject to the current market conditions.
The average interest rate for a 30-year mortgage is currently hovering at just under 6%. This is a notable increase from the average rates one or two years ago, but it isn't exceptionally high when considering data from the last 20 years. According to data from Freddie Mac, interest rates in the early 2000s averaged between 6% and 8%. By 2007, rates had dropped slightly to around 5% or 6%. Then, throughout the 2010s, rates continued to decline and averaged between 3% and 5%. They increased slightly again from 2017 to 2019 and then dropped significantly in 2020.
By late summer of 2020, mortgage rates dropped to a historic low of under 3%. This occurred primarily as a result of the federal government's response to the COVID-19 pandemic. The Federal Reserve decreased the federal funds rate in an effort to encourage borrowing, which caused mortgage rates and other loan rates to decline. Additionally, the Fed bought a massive amount of mortgage-backed securities, which further reduced interest rates. Because rates were so low throughout 2020 and 2021, many homeowners chose to refinance at that time.
In the fall of 2021, rates began to slowly creep back up, reaching above 3% in October. The spring of 2022 saw a significant increase as interest rates rose to almost 6%. Now, experts predict that mortgage rates will hover between 5% and 7% for the rest of the year. However, rates can change on a day-by-day basis.
Putting today’s rates in context
Mortgage rates seem especially high right now because they've increased so much since last year. When looking at long-term trends, though, a mortgage rate of 5% or 6% is fairly typical. It may be slightly higher than the average rates throughout the 2010s, but you may still benefit from refinancing your mortgage.
In many cases, 30-year cash-out mortgage rates are slightly higher than the rates for original home loans. Because taking cash out of your mortgage creates a bigger risk for your lender, you should expect to see a larger rate. According to data from Bankrate, the average rates for a 30-year fixed refinance are very similar to the rates for an original 30-year loan. A cash-out refinance, however, may cost you more.
One key reason that homeowners refinance is to take advantage of a lower interest rate. With the 30-year cash-out mortgage rates today, you might not secure a lower rate than your original mortgage. If your primary goal for your refinance is to access the equity in your home, though, you might decide that the 30-year cash-out mortgage rates are acceptable.
If you're not happy with the current 30-year mortgage rates but still wish to refinance, you could consider a 15-year cash-out refinance. A 15-year refinance will result in a higher monthly payment because it shortens the loan's lifespan, but 15-year cash-out mortgage rates are almost always lower than 30-year rates.
What affects current 30-year cash-out mortgage rates?
Your mortgage lender will calculate your refinance rate based on the size of the loan, your credit history, your debt-to-income ratio, and other personal factors. When you can prove that you're a trustworthy borrower, your lender will offer you a lower rate. However, overall trends in mortgage rates are determined by several economic factors.
The Federal Reserve rates have a significant impact on 30-year cash-out mortgage rates. In June of 2022, for instance, the Fed increased rates by 0.75%. Inflation can play a major role in interest rates, too. When lenders predict that the purchasing power of their money will decline in the future due to inflation, they'll charge higher interest to increase their compensation. The results of inflation are just as visible in the current mortgage rates as they are in other sectors of the economy.
Supply and demand affect mortgage rates, too. When the demand for mortgages increases, lenders can also increase their rates. When there are fewer homes on the market or fewer homes being built, lenders decrease their rates to encourage more people to apply for mortgages.
How do other loans compare?
If today's 30-year cash-out mortgage rates seem less than ideal to you, you might consider other borrowing options to access your home equity. For example, HELOCs and home equity loans can both provide you with sizable cash payments if you've built up enough equity in your property.
Keep in mind, though, that HELOC and home equity loan rates tend to fluctuate alongside mortgage rates. When 30-year cash-out mortgage rates increase, you should also expect other loan rates to increase. Additionally, most HELOCs have variable interest rates, so you may continue to see changes in your rate as the market shifts.
Mortgage rates are always changing, and although experts make their best guesses as to the future of the real estate market, you can never predict with certainty the best time to refinance. The 30-year cash-out mortgage rates today are not as low as they were in 2020 or 2021, but you could still benefit from refinancing your home loan. If you're not sure whether now is the right time, consult with a mortgage expert who can offer advice based on your unique situation. Your mortgage consultant will help you time your refinance so that you secure the lowest possible rate.