4 Mortgage Refinancing Trends: What to Expect in 2026

Mortgage rates have slowly, but surely come down since their peak in 2023, a potential refinancing incentive for buyers who purchased their homes when the market was more volatile.

Lower mortgage rates are driving an increase in refinancing activity, according to the Federal Housing Finance Agency (FHFA). Notably, in August 2025, while rates took a slight dip, refinancing activity increased by about 12.5% compared to the previous month.

While mortgage interest rates can rise or fall depending on the overall market outlook, staying on top of these trends can help homeowners make more informed decisions when it comes to refinancing. Here are 4 refinancing trends you can expect to see in 2026.

1. Lower Rates Driving Refinancing Demand

Mortgage rates are largely influenced by the federal funds rate, which is a benchmark rate that's set by the Federal Reserve. When this rate increases or decreases, mortgage rates often do the same.

Experts say mortgage rates are prime to come down in 2026 due to rate cuts from the Federal Reserve, but this also depends on other economic factors like unemployment and inflation. As of right now, the Federal Reserve has signaled additional rate cuts in 2026, which could encourage refinancing from homebuyers who purchased property when the housing market was more competitive and mortgage interest rates were higher.

The Federal Reserve uses monetary policy to stimulate spending and revive a slow economy, or rein in spending by making it more expensive to borrow money. As of January 2025, the average rate on a 30-year fixed-rate mortgage was 7.04%, according to Freddie Mac. But at the time of this writing, that number had dropped to 6.2134%.

For some perspective, during the COVID-19 pandemic, the federal funds rate was slashed to 0.05% and low rates stimulated growth in the housing market. By December 2020, the average rate on a 30-year, fixed-rate mortgage was just 2.66%.

2. Cash-Out Refinancing Gaining Popularity

The FHFA found that cash-out refinancing became more popular in early 2025 as mortgage rates fell—and some experts are expecting more rate cuts in 2026.

However, even as the rate forecast looks promising, it’s important to remember the added debt that you can take on with a cash-out refinance loan compared to a standard rate-and-term.

A cash-out refinance loan works a little differently than a regular mortgage refinance. Borrowers still take out a new home loan, but typically borrow more than their existing mortgage balance. The borrower then receives the difference as a lump-sum payout.

However, borrowing more can also translate into a larger monthly payment, which can be a drawback for borrowers if cashflow becomes an issue.

3. Shift Toward Online and Digital Mortgage Services

A 2024 Fannie Mae survey found 86% of online respondents preferred to complete a mortgage or rental application online, and almost three-quarters preferred to find their mortgage lender this way.

When refinancing, you may choose to go with an online mortgage servicer or a traditional lender that uses digital mortgage tools. This has several advantages:

• Speed: It allows you to upload your required documents so that your application can be evaluated more efficiently. These tools often speed up the loan origination process, according to Freddie Mac.
• Convenience: Instead of working with your mortgage servicer in person, you'll have the ability to complete your refinance application virtually on your time. That's a real advantage for busy homeowners.
• It might save you money: Freddie Mac also says digital mortgage tools can result in lower closing costs.

If you go the digital route, you'll want to do your research to ensure you're working with a legitimate company and getting the best mortgage terms for your personal situation. Read customer reviews and verify that they're licensed before submitting your financial information.

3. Impact of Economic Uncertainty on Refinancing

Mass layoff warnings in the United States are at peak levels right now. Economic forecasts predict high unemployment, and market volatility can influence refinancing trends and mortgage rate predictions, but it also depends on the specifics.

For example, if the Federal Reserve is trying to stimulate a sluggish economy, they may cut interest rates to boost consumer spending. That would reduce the cost of borrowing—which might inspire homeowners to refinance.

At the same time, it’s still unclear how tariffs and inflation will continue to play a role in the next year. While the federal funds rate could increase in an effort to cool inflation, some analysts are saying tariffs on construction supplies could impact costs affiliated with home ownership and renovation—which in turn, could impact overall home prices and borrowers’ abilities to refinance.

The Bottom Line

If interest and refinance rates continue to come down, there may be a surge in refinance activity, including cash-out refinances. Either way, consider your options to ensure refinancing would be beneficial compared to your current mortgage.

Before refinancing, consider your personal financial situation to determine if the timing is right. Your current interest rate, monthly payment and loan term are important things to think about in regards to affordability, as well as your break-even point. This is the point at which your savings will begin offsetting your closing costs.

Working with a financial professional can also help you decide if a refi is the right move. It can help save you money in the long run, but you can expect upfront costs.