Highest and Lowest Mortgage Rates in the U.S.

The U.S. real estate market is experiencing challenging times as mortgage rates reach record highs. And sadly, the truth is, higher interest rates and rapidly rising home prices are pushing some Americans to delay homeownership plans.

On the other hand, mortgage rates have more than doubled since January 2022, and the average rate on a 30-year fixed mortgage, the most popular among home buyers in the U.S., has peaked at the 7% mark, according to the Federal Home Loan Mortgage Corp. or Freddie Mac.

As a homebuyer, it’s crucial to know that there are many components in determining the mortgage rate. These include the location of the property, the prevalence of lenders, housing prices, and even local or state laws.

 

What is a mortgage rate?

Simply put, a mortgage rate is the rate of interest charged on a mortgage. The mortgage rate determines the annual cost of borrowing money from a lender to purchase a property. It’s typically paid monthly along with the principal payment and will remain intact until you ultimately pay off the loan.

Mortgage rates are not to be mixed up with the annual percentage rate, which reflects the mortgage interest rate, including other charges.

 

Why do mortgage rates increase?

Lenders, such as banks and other financial institutions, set mortgage rates depending on how risky the loan is. However, the U.S. Federal Reserve’s monetary policy considerably affects those rates. Remember that the riskier the loan, the higher the interest rates will be placed on it.

In November, the Fed implemented a fourth consecutive rate hike of 3.75 basis points and signaled that the rate increases could continue well over 2023. The Fed is expected to conduct another rate hike during its final meeting for 2022 in December. Morgan Stanley predicts that if inflation starts to ease in 2023, mortgage rates in the country could average around 6.2% or even below 6%.

Other factors, such as supply and demand, also influence rates for fixed mortgages. When mortgage lenders have a vast pool of clients, they increase rates to cut down demand, but when business is light, you can find lower rates to attract more customers.

 

Where in the U.S. can I find cheap mortgage rates?

Location plays a vital role in determining higher or cheaper mortgage rates, other than your personal finance, of course. Some data shows that the homeownership rate in the U.S. stood at 65.8% as of the end of the third quarter, staying steady since June 2022. The country is seeing an influx of renters as prices continue to soar and homeowners cannot keep up with the higher cost of living.

Meanwhile, data from financial company Bankrate lists the top 5 states in the U.S. with the highest and lowest mortgage rates.

 

Top 5 states with the highest mortgage rates as of November 2022 (in no particular order)

 

1. Alaska – 6.91% for a 30-year fixed and 6.38% for a 15-year fixed
2. Montana- 6.93% for a 30-year fixed and 6.17% for a 15-year fixed.
3. Utah- 6.83% for a 30-year fixed and 6.10% for a 15-year fixed
4. North Dakota- 6.82% for a 30-year fixed and 6.20% for a 15-year fixed
5. Louisiana- 6.88% for a 30-year fixed and 6.20% for a 15-year fixed.

 

Top 5 states with the lowest mortgage rates as of November 2022 (in no particular order)

 

1. Massachusetts- 6.57% for a 30-year fixed and 5.95% for a 15-year fixed.
2. New York- 6.67% for a 30-year fixed and 6.15% for a 15-year fixed
3. New Jersey- 6.75% for a 30-year fixed and 6.09% for a 15-year fixed
4. Hawaii- 6.50% for a 30-year fixed and 5.72% for a 15-year fixed
5. Connecticut- 6.67% for a 3-year fixed and 6.06% for a 15-year fixed.

 

Mortgage rates may be lower in some areas, but other factors could leave you shelling out more. For example, New York, New Jersey, and Connecticut are notorious for higher property taxes, with New York’s property tax rate reaching 9.96% as of October 2022. However, many cities in Alaska do not levy any property tax.

Granted, mortgage rates directly impact your monthly payment on your home purchase, but it doesn’t necessarily have to be the main factor in deciding to back off or purchase a home.

 

How Much Could Be Your Mortage?

If you’re wondering about the total mortgage of your potential property, a lot of banks and mortgage lending firms offer mortgage calculators for customers’ convenience. It’s good to know as well that mortgage rates may still vary from lender to lender because they have different appetites for risk and varied overhead costs. Financial experts recommend comparing at least two to three quotations to ensure you get the best rate, fees, and terms for your financing.

 

Do Your Research

Now that the world is facing economic bottlenecks, the inflation rate influences mortgage rates more than ever. However, homeownership has always been part of the American dream, and despite potential struggles, it still doesn’t mean it’s impossible.

And as a home buyer, it’s crucial that you analyze all factors that could impact this life-changing decision. Whether you are looking to purchase your first or second property or even an investment property, it’s essential that you do extensive research before you consider a property to call your own. This includes doing a little bit of background checking on the seller, viewing the property, asking every question you have in mind, and considering your negotiables and non-negotiables.

 

Buy a Home from a Reliable Real Estate Investor

At Shorefront Investments, we offer highly, discounted, off-market properties in good condition. We can help you find the property you desire as well as assist you throughout the buying process, from viewing to transferring titles for your convenience. In addition, we buy properties in any condition and close deals as fast as 7-14 days. Our team provides a reasonable cash offer within 24 hours of viewing the property. Call us at (850) 713-4866 or email info@shorefront-investments.com to learn more.