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Should I refinance when interest rates are going up?

After the economic recession of 2008, the Federal Reserve lowered interest rates, in part to help support banks in lending money to consumers and to stimulate consumer spending and investment. By many measures, today’s economy has improved over the past few years, so, guess what? Yep - there’s talk of the Fed increasing interest rates. This chatter has many consumers thinking about refinancing their mortgage now while rates are still somewhat low.

So, is now a good time to refinance your mortgage or not?

Pro: A small increase makes a big difference.

When it comes to mortgage rates, even a small increase makes a different. On a $200,000 mortgage, half of 1 percentage point of interest means a difference of $20,000 or more over 30 years. So a lower rate is certainly something to consider taking advantage of.  

Con: Uncertainty as to a mortgage rate change.

It’s a little confusing, but the Federal Reserve doesn’t actually set the rate at which banks lend money to consumers for mortgages. As explained by, when the Fed “raises interest rates,” what they’re actually doing is boosting the target of one specific rate. Because the federal funds rate is basically the “cost” of money for banks, as the federal funds rate rises so does the “price” of all bank loan products.

There’s some disagreement among industry experts as to whether the Federal Reserve will in fact adjust their rate, and even if they do, how much of an impact that will make on the actual rate consumers pay for their mortgages and how long any impact would take to reach consumers. 

If you’re thinking about refinancing, then you may want to check out online service that can help you track leading rates, like these offered by or Mortgage News Daily website.

Photo of a house and paperwork

Pro: Switching to a fixed-rate mortgage.

If you currently have an adjustable-rate mortgage (ARM), then logic would suggest that you may want to consider refinancing to a fixed-rate mortgage while rates are low. Remember, unlike ARM mortgages, fixed-rate mortgages are not affected by fluctuating interest rates. Once you’re approved and locked in to a fixed-rate loan, then your interest rate will not change, whether interest rates go up or down.

Con: Closing costs.

Many lenders charge closing costs and other loan fees for new loans, which can quickly add up. Do some number crunching to ensure you’re still saving money after paying closing costs and fees. 

If you’re thinking about refinancing, we’re here to help! At WaFd Bank, we don’t sell our loans – unlike most banks. Why does that matter? Well, if rates fall in a few years, you might be able to lower the rate on your existing mortgage with us.

Best of all? This can be done without refinancing! So you don’t have to start over. And you can build equity faster and pay off your home on schedule.

  Talk to your local neighborhood loan officer or call us at 800-324-9375 to find out more.