Mortgage rates refer to the annual interest fee charged to a homeowner for the loan they take out to buy a home. This fee is expressed as a percentage of the total loan amount paid annually. For example, 3% interest on a $100K mortgage would be $3,000 each year. These rates are tracked most frequently for mortgages that last 15 years and 30 years. Mortgage rates can also simply be called interest rates when talking about mortgages.
When mortgage rates are low, the cost to borrow for home owners is lower. This means that buyers are often more willing to purchase homes when interest rates are low. Existing homeowners may also refinance their existing mortgage to get a better rate. When mortgage rates are high, buyers may wait to buy a home. Rising rates tend to limit increases in home prices.
In general, most agents, owners, and buyers prefer interest rates are low. This way, buyers are more likely to feel good about taking on a loan to buy a new home.
Mortgage rates don’t indicate how easy or hard it is for homeowners to secure a mortgage. Even if interest rates are low, many lenders may still have high standards for who they lend to. This could mean that it is an attractive time to buy a home, but not all potential buyers can get a loan.
In addition, there are other fees and terms involved in a mortgage. These can influence or supplement interest fees. They include borrower credit quality, loan size, taxes, and insurance. If homes themselves are very expensive relative to historical prices, low rates might not be enough to drive buyers into the market.
The Mortgage Bankers Association performs a weekly survey that includes rates for 15-year and 30-year mortgages.