When Will the Next Mortgage Refinance Wave Happen?

The next refinance wave will begin when mortgage rates drop to a level that makes financial sense for a meaningful portion of homeowners. Historically, that means rates need to fall about 1% to 1.5% below where a borrower currently holds. Given that millions of homeowners locked in rates between 2.5% and 4% during 2020-2022, rates would need to approach those levels to trigger a large-scale refinance wave.

A smaller refinance wave could happen sooner if rates drop into the 5% range, as homeowners who bought or refinanced at 7-8% would benefit. But the massive refinance boom of 2020-2021 required rates near all-time lows. Expecting a repeat requires rates to return to those historical anomalies.

For now, the refinance market is primarily driven by necessity rather than opportunity: cash-out refinances for debt consolidation or home improvement, and rate-and-term refinances for adjustable-rate mortgages adjusting higher.