Mortgage rates are based on an array of personal and external factors, including a buyer's overall financial health and the economy.
Jump to insightMortgage rates have been on the rise over the last few years. The average 30-year fixed mortgage rate came in at 2.65% on Jan. 7, 2021; it’s now around 7% as of mid-2025.
Jump to insightWhile some mortgage rate factors are beyond your control, you can typically get a lower rate by improving your credit score, paying off other debts and shopping around among lenders.
Jump to insightWhat is a mortgage rate?
A mortgage rate is the interest charged by a lender on a home loan. When you borrow money to buy a home, you agree to repay the amount you borrow (the principal) along with a percentage of that amount as interest. The mortgage rate determines how much interest you'll pay over the life of the loan and directly impacts your monthly payment.
Mortgage rates are typically expressed as an annual percentage rate (APR), which includes both the interest rate and any lender fees or other costs. Rates can be fixed, meaning they stay the same throughout the loan term, or adjustable, meaning they fluctuate after an initial fixed period based on market conditions.
Understanding how mortgage rates work is essential for homebuyers because even a small difference in the rate can translate into thousands of dollars in savings or additional costs over the life of the loan. Factors that influence mortgage rates include personal creditworthiness, economic conditions and lender-specific policies.
How mortgage rates are set in the market
Mortgage rates are largely shaped by broader market forces, particularly the bond market. Mortgage lenders typically base their rates on the yield of 10-year U.S. Treasury bonds, which are considered a benchmark for long-term interest rates. When Treasury yields go up, mortgage rates usually follow.
Lenders also consider the costs associated with bundling and selling mortgages on the secondary market. These mortgage-backed securities (MBS) are traded among investors, and the demand for MBS can affect the rates that lenders offer. If demand is high, lenders may offer lower rates to remain competitive. If demand is low, rates might rise to compensate for reduced investor interest.
Other contributing factors include inflation expectations, economic outlooks and risk premiums lenders build into their pricing models. In volatile or uncertain times, lenders may raise rates slightly to guard against potential losses. These external dynamics, combined with personal borrower factors, help determine the final rate a homebuyer sees.
Personal factors that affect mortgage rates
A range of personal factors concerning your household finances and the home you're buying will impact the mortgage rates you get. These factors include your overall credit health and the financial position you're in when you're ready to buy a home.
Borrowers considered to be a low risk to their lenders receive better mortgage rates than those who appear to have a higher chance of defaulting. Here's a rundown of various personal factors that impact mortgage rates.
Credit score
Fannie Mae and Freddie Mac revamped their home mortgage pricing grids in May 2023. Based on the new pricing matrix for home purchase loans, individuals with a credit score of 780 or higher are positioned to get the lowest mortgage rates overall.
Down payment
Fannie Mae and Freddie Mac's changes that took effect in May 2023 allow some individuals with lower down payment amounts to pay lower mortgage fees than those who put down 20% or more. The Urban Institute notes that, while this may seem counterintuitive, the lower mortgage fees for borrowers making lower down payments are likely tied to the obligation these borrowers have to pay PMI, which protects lenders from default.
Loan-to-value ratio
Debt-to-income ratio
DTI impacts mortgage rates because borrowers with more debt are seen as a higher risk. The maximum DTI accepted for a mortgage varies by mortgage type and lender, but most conventional mortgages will require a DTI of 50% or less.
Loan term
Fixed vs. adjustable rates
Property use
Mortgage rates and fees for buyers investing in a primary home are generally lower than for buyers seeking vacation homes or investment properties.
Location
Loan type
The CFPB says this fact underscores the importance of shopping around among lenders and mortgage types to find the best deal.
External factors that affect mortgage rates
A range of economic factors beyond a homebuyer's control will impact the rates they qualify for. These external factors heavily influence the amount of interest homebuyers have to pay.
The Federal Reserve
The Federal Reserve (“the Fed”) doesn't set mortgage rates directly, but it does set the federal funds rate — or the rate banks pay to borrow money from one another. Ultimately, this rate influences the interest rates consumers pay each time they borrow money, whether through credit cards, personal loans, mortgages or other forms of credit.
The Fed raised the federal funds rate many times throughout 2022 to 2025, leading to a dramatic rise in mortgage rates over the last few years. In fact, Freddie Mac figures show the average 30-year fixed mortgage rate increased from 2.65% on Jan. 7, 2021, to 6.72% on July 16, 2025.
Economy
Mortgage broker Joseph Melara of Residential Brokers in Palm Desert, California, emphasizes that the economy is another factor that influences mortgage rates. Inflation, employment rates and GDP growth affect rates for all homebuyers.
"When the economy is strong, mortgage rates tend to rise, while during periods of economic uncertainty or recession, rates tend to decrease," he said.
Melara says the supply and demand dynamics of the mortgage market can also affect rates.
"High demand for mortgages can lead to higher rates, while lower demand can result in lower rates," he said. "Similarly, the availability of funds for lending, determined by factors like investor appetite for mortgage-backed securities, can influence rates."
Points and lender credits
Finally, Melara says points can impact mortgage rates. The term "points" refers to upfront fees paid to the lender at closing, with each point representing 1% of the loan amount.
"By paying points, borrowers can lower their mortgage rate," Melara said.
Conversely, lenders may offer lender credits toward closing costs in exchange for a higher interest rate.
"It's important for borrowers to evaluate the cost and benefits of paying points or accepting lender credits based on their specific financial goals and circumstances," he said.
Since the availability of points and lender credits can vary across mortgage lenders, this is still considered an external factor that influences mortgage rates.
Current mortgage rates
Rates are effective 05/24/2026 and are subject to change without notice. APR shown is provided by a partner of ConsumerAffairs.
| Product | APR |
|---|---|
| 6.978%0.0% | |
The APR shown of 6.978% is available for a 30-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
| 6.947%0.0% | |
The APR shown of 6.947% is available for a 20-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
| 6.064%0.0% | |
The APR shown of 6.064% is available for a 15-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
| 6.067%0.0% | |
The APR shown of 6.067% is available for a 10-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
Current refinance rates
| Product | APR |
|---|---|
| 7.11%0.0% | |
The APR shown of 7.110% is available for a 30-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
| 7.161%0.0% | |
The APR shown of 7.161% is available for a 20-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
| 6.13%0.0% | |
The APR shown of 6.130% is available for a 15-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
| 5.632%0.0% | |
The APR shown of 5.632% is available for a 10-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. | |
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How to estimate your mortgage rate
If you're curious about the mortgage rate you'll pay and your new home's monthly payment, several steps can help you get rough estimates. For example, you can use an online mortgage calculator to calculate your new home payment using current mortgage rates. You can also contact a few lenders to see what rates they're offering most buyers who apply and which eligibility requirements you'll need to meet to qualify.
Some of the best mortgage lenders may allow you to lock in your rate as early as preapproval; others won’t offer a rate lock until after you're formally approved for a home loan. But every lender should be able to give you a ballpark figure of its rates if you simply call in or inquire about rates online.
FAQ
What is a good mortgage rate?
Mortgage rates fluctuate based on economic conditions, so the standard for a “good” mortgage rate varies over time. It can also vary based on a borrower’s credit score, down payment amount and other factors.
A homebuyer can make sure they're getting a good mortgage rate by shopping around across multiple lenders and comparing offers.
Can I negotiate a mortgage rate?
Homebuyers may be able to get a lower mortgage rate by paying points upfront and shopping around among lenders to find the best deal. Take the lowest rate you’re offered and ask your preferred lender for a rate match.
Are mortgage rates the same for all lenders?
Mortgage rates are not the same for all lenders. Different lenders can offer slightly different mortgage rates, which is another reason you'll want to compare lenders and loan offers before you move forward with a home purchase.
Bottom line
Your ability to obtain a low mortgage rate can depend on a host of factors, and not all of them are within your control. However, you can typically get a better mortgage rate if you work on improving your credit score and take the time to compare the types of mortgages and the lenders that offer them.
You may also be able to score a lower mortgage rate if you pay points on your mortgage upfront. Whatever you do, take the time to speak with at least a few mortgage companies to find out which moves could help you get a better deal overall.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Urban Institute, "Fannie Mae and Freddie Mac’s New Pricing Is Not Punishing Those with Better Credit: Follow the Numbers." Accessed July 18, 2025.
- Consumer Financial Protection Bureau, "What is a debt-to-income ratio?" Accessed July 18, 2025.
- Consumer Financial Protection Bureau, "What is a loan-to-value ratio and how does it relate to my costs?" Accessed July 18, 2025.
- Consumer Financial Protection Bureau, "What is private mortgage insurance?" Accessed July 18, 2025.
- Consumer Financial Protection Bureau, "Understand loan options." Accessed July 18, 2025.
- Consumer Financial Protection Bureau, "What is the difference between a fixed-rate and adjustable-rate mortgage (ARM) loan?" Accessed July 18, 2025.
- Discover, "How does the Federal Reserve affect mortgage rates?" Accessed July 18, 2025.
- Freddie Mac, "Mortgage Rates." Accessed July 18, 2025.
- Consumer Financial Protection Bureau, "Seven factors that determine your mortgage interest rate." Accessed July 18, 2025.
