President Trump is pressing for lower interest rates sooner rather than later and is lining up rate-cut-friendly candidates to replace Federal Reserve Chairman Jerome Powell. In the meantime, mortgage rates are treading water in the upper 6% range, and the Fed left short-term interest rates unchanged at its last meeting on July 30

However, the federal funds rate is not the only driver of mortgage rates. When will mortgage and refinance rates drop significantly? Or will they move higher still?

The bottom line for homeowners: Is now a good time to refinance your mortgage?

The Fed uses shorter-term interest rates to influence bond markets and steer the economy. By hiking the federal funds rate, it reversed high prices by tamping down consumer demand. Then, in late 2024, the central bank lowered rates to fine-tune the economy.

Now, with economic uncertainty continuing as of the July 30 meeting, the Fed remains on hold.

Tariffs, a rising deficit, and a tenuous political climate overseas have unsettled the bond market. And that’s key. The 10-year Treasury yield is a proxy for mortgage rates. It’s not a one-to-one interest rate relationship; there can be a 2% to 3% difference between Treasurys and mortgage rates. But the directional moves are coordinated.

Until markets settle, bond yields will continue to waver.

Dig deeper: How the Fed rate decision affects mortgage rates

Most mortgage market observers are looking for home loan rates to stay in the 6% to 7% range through 2025.

Was that a groan? Did you want to hear the magic 3% number?

In its latest housing outlook, Fannie Mae expected mortgage rates to be 6.5% by the end of 2025 and 6.1% by the end of 2026.

Consider this: 6% to 6.5% is a good interest rate range when you consider that the 50+ year average for mortgage rates is over 7.5%. Rates were in the 7% range way back in 1971 when Freddie Mac began keeping records.

Read more: How to get the lowest mortgage rates

In financial matters, people often search for easy answers. That's often where "rule of thumb" guidance comes into play. How much money do you need to retire? What percentage of your retirement portfolio can you safely spend annually?

It's the same for mortgage rates. The question often is: How much do interest rates need to drop before I should refinance into a new mortgage loan?

In the past, the easy estimate was 2%. Then, as rates fell, it was 1%. We've seen mortgage lenders say that a half-point — or even a quarter-point — drop in interest rates can make a refi worthwhile.

Every easy answer is mostly just noise. Like all rules of thumb, a quick solution is not often the correct answer. Any financial decision needs an answer derived from actual math.

Here's the five-step process to making a good decision when it comes to refinancing your mortgage:

Know your current interest rate, your monthly payment, and your credit score.

Determine if you'll refinance your loan balance or would prefer a cash-out refinance.

Will you refinance for a loan term that equals or is shorter than the time remaining on your existing mortgage? (Preferred.) Or will you extend your debt? (Not preferred, but a worthwhile option in certain circumstances.)

Get an estimate of your closing costs from a mortgage refinance lender (or preferably two or more).

Determine how long it will take to recoup those new loan costs with your monthly savings on a lower interest rate. That's your break-even point. Is it equal or less than the time you plan on remaining in your current house? Good. Longer? Not good.

Now you have the answer to the question: Is it a good time to refinance your current mortgage?

About 82% of homeowners today have a mortgage with a rate of 6% or lower, according to Realtor.com. Rather than refi, many of these owners tap their equity with a second mortgage, such as a home equity line of credit.

If you've been waiting for mortgage rates to give you an entry point into a refinance, the HELOC can be an alternative. Hang on to your low primary mortgage rate and get access to the value already accrued in your home. The line of credit allows you to get the cash you need, pay it off, and repeat as needed.

Many lenders offer an introductory interest rate lower than the variable rate that kicks in later. Plus, if mortgage rates do go down, you can still jump into a refinance.

Learn more: The best HELOC lenders

The Fed is worried about a return to higher inflation due to tariffs. Even without the central bank lowering short-term interest rates, such concerns can unnerve the bond market. That can cause mortgage rates to slip lower. It hasn't yet, but it's a possibility. Keep your eyes on daily mortgage refinance rates.

It can be. Even if you're on the margin for a mortgage rate improvement, there are many good reasons to refinance. For one thing, Americans are sitting on a record $33 trillion of home equity, so many may choose a cash-out refinance — or a HELOC or home equity loan — to access that value for home improvements or other cash needs.

The cost of refinancing isn't cheap. You'll pay from 2% to 6% of the total loan in origination fees and closing costs. And if you extend your loan term when you refinance, you'll pay way more interest over the life of the loan. Even no-closing-cost refinances have their pros and cons. Consider all of your options before jumping into a refi.

This article was edited by Laura Grace Tarpley.