Mortgage Rates & Trends

Mortgage rates play a major role in how much home you can afford and how much interest you’ll pay over the life of a loan. Even a small change in rates can increase or decrease your monthly payment by hundreds of dollars and add tens of thousands in long-term costs.

This guide explains how mortgage rates work, why they change, current rate trends, and how interest rates affect affordability, refinancing decisions, and your monthly mortgage payment.

What Are Mortgage Rates?

A mortgage rate is the interest rate charged by a lender on a home loan. It determines how much interest you pay in exchange for borrowing money to purchase or refinance a property.

Mortgage rates are expressed as an annual percentage and applied to your loan balance over time through a process called amortization. Your monthly payment includes both principal repayment and interest charges.

Interest rate: Determines your monthly principal and interest payment.
APR: Includes the interest rate plus certain fees, helping you compare loan offers.
Fixed-rate mortgages: Lock the same rate for the life of the loan.
Adjustable-rate mortgages (ARMs): Change after an initial fixed period.

Mortgage Rate Trends: What’s Happening Now?

Mortgage rate trends reflect broader economic conditions rather than individual lender decisions. Rates typically move in response to inflation expectations, economic growth, and changes in financial markets.

While daily headlines may highlight rate changes, borrowers should focus on broader trends rather than day-to-day fluctuations. Weekly and monthly averages provide a clearer picture of where rates are headed.

Even when average rates stay the same, your personal mortgage rate may vary based on credit score, down payment, loan type, and lender pricing.

Why Do Mortgage Rates Rise and Fall?

Mortgage rates are influenced by a combination of economic forces, government policy, and investor demand. Lenders do not set rates arbitrarily.

Inflation: Higher inflation usually leads to higher mortgage rates.
Federal Reserve policy: Rate hikes and cuts affect borrowing costs indirectly.
10-year Treasury yields: Mortgage rates tend to track long-term government bond yields.
Economic data: Jobs reports and GDP growth influence investor confidence.
Mortgage-backed securities (MBS): Investor demand affects lender pricing.

How Mortgage Rates Affect Your Monthly Payment

Mortgage rates directly impact your monthly payment. A higher rate increases the interest portion of each payment, while a lower rate reduces it.

For example, a small rate increase of just 1% can significantly raise your payment and add tens of thousands of dollars in interest over a 30-year loan.

You can see this effect instantly using our mortgage payment calculator or review how payments change over time with the mortgage amortization schedule.

Mortgage Rates and Home Affordability

Rising mortgage rates reduce buying power, even if home prices stay the same. When rates increase, buyers often qualify for smaller loan amounts based on income and debt limits.

Before shopping for a home, it’s important to evaluate affordability using your income, debts, and expected rate environment.

Helpful tools include the mortgage affordability calculator and our Home Buying Process & Affordability guide.

How Mortgage Rates Affect Refinancing Decisions

Mortgage rates play a critical role in refinancing. Homeowners often refinance to secure a lower rate, reduce monthly payments, or shorten the loan term.

A refinance typically makes sense when the monthly savings outweigh closing costs over time. This is known as the breakeven point.

You can analyze this using the refinance calculator and the refinance breakeven calculator.

How to Get the Best Mortgage Rate

Improve your credit score before applying
Lower your debt-to-income ratio
Compare multiple lenders
Understand rate locks and lock timing
Evaluate discount points carefully

Paying points can reduce your interest rate, but only makes sense if you plan to stay in the loan long enough to recover the upfront cost.

Mortgage Rate FAQs

What is a good mortgage rate right now?

A “good” mortgage rate is one that’s competitive for your credit score, down payment, loan type, and points/fees. Because rates vary by borrower and lender, the best way to judge is to compare multiple quotes on the same day (same loan term, same points) and look at both the interest rate and APR. If you’re shopping, run your quotes through our mortgage payment calculator to see how each offer changes your monthly payment and total interest.

Why did mortgage rates increase this month?

Mortgage rates often rise when investors expect higher inflation or stronger economic growth. In many cases, rates move up because bond yields rise (especially the 10-year Treasury) or because mortgage-backed securities become less attractive to investors. Even if the Federal Reserve doesn’t change its policy rate, new inflation data, jobs reports, and market volatility can push mortgage rates higher or lower.

How much does a 1% rate change affect my payment?

A 1% rate change can be a big deal-especially on a 30-year mortgage-because you’re paying interest on the balance for a long time. The exact impact depends on your loan amount and term, but the increase is usually meaningful enough to change affordability. The fastest way to see the difference is to plug your numbers into our calculator and compare two scenarios (for example, 6.5% vs. 7.5%). If you want to see how that change plays out over time, use the mortgage amortization schedule to compare total interest and remaining balance year by year.

Should I lock my mortgage rate?

A rate lock can protect you from rising rates while your loan is processed. Many borrowers lock when they’re under contract and comfortable with the payment. If rates drop after you lock, some lenders offer a “float-down” option (often with rules or fees), but not all do. If you’re unsure, ask lenders how long the lock lasts, whether it covers the closing date, and what happens if closing is delayed.

What’s the difference between APR and interest rate?

The interest rate determines your monthly principal-and-interest payment. The APR reflects the interest rate plus certain lender fees and prepaid finance charges, expressed as an annual rate, so you can compare loans with different fee structures. APR is most useful when you expect to keep the loan for a meaningful amount of time; if you plan to refinance or sell soon, comparing total upfront costs and the monthly payment may matter more than APR alone.

See How Mortgage Rates Affect Your Payment

Mortgage rate trends matter most when applied to your real numbers. Use our mortgage payment calculator to see how today’s rates affect your monthly cost, affordability, and long-term interest.

Calculate Your Mortgage Payment