Mortgage rates refer to the specific interest rate which was given to a mortgage or home loan. Typically mortgage rates are either fixed or adjustable. Typically this rate can vary sharply and is primarily influenced by a borrower’s credit rating. Mortgage rates are also influenced by interest rate cycles.
As the name suggests, fixed rate mortgages have a fixed rate throughout the entire period of the mortgage. Adjustable rate mortgages (ARMS) are usually fixed for a period of time, then adjusted. Both options have certain benefits and drawbacks for borrowers.
Essentially a mortgage rate reflects what percentage a borrower will pay to receive a mortgage. It is the interest that the borrower will owe annually which will be a portion of the mortgage’s total balance.
As mentioned previously, a borrower’s credit score or rating and history is a key influence of rates offered by lenders. The better a borrower’s credit score and history, the lower the mortgage rate will usually be. Other personal factors include the down payment amount and scope of the loan. The location of the property and loan-to-value can also play a part.
Larger and non-personal economic factors can also influence mortgage rates. This includes inflation rates, Federal Reserve policies, the stock market, and the general strength of the economy. 10-year Treasury yields are also a big non-personal economic factor. As the yields rise, fixed-rate mortgage rates typically do too.
Mortgage rates can also vary from lender to lender and are at times negotiable. As rates can potentially total in tens of thousands of dollars or more, borrowers should seek the lowest rate available.