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Average Home Mortgage Interest Rate

Determining the average home mortgage rate is difficult because different lenders set different rates.

Visiting the websites of various mortgage lenders can give a homebuyer a good indication of what the averages are. Many online sources list the interest rates from various lenders, taking a look at these sites can give you a good idea what mortgage interest is being charged.

The interest rate is the cost of borrowing money for real estate prices from banks. The rate is originally set by the Federal Reserve which loans money to banks. The banks then loan the money to private individuals who use it for mortgages. The interest rate is usually based upon inflation which is the rate at which the value of money depreciates.

What is the average mortgage interest rate

In the first decade of the 21st Century the mortgage interest rate in the United States usually hovered around 5%. This meant that mortgage interest in recent years has been quite a bit lower than other kinds of interest.

The reason mortgage rates are lower than other kinds of interest is that banks take less of a risk when they loan money on real estate. The rates of defaults on mortgage loans are lower so banks are more likely to get their money back. Mortgages are also secured loans because the home is regarded as collateral. If the mortgage isn’t paid the bank can simply foreclose on the home.

Mortgage interest rates have been low for the last few years because of the low rate of inflation in the early 21st Century. If inflation goes up mortgage interest rates will also rise, because inflation increases the cost of lending money.

Varying interest rates

Not every borrower will be able to get a mortgage with an average interest rate. Borrowers with lower credit scores will usually have to pay higher interest rates because banks take more of a risk loaning money to such individuals.

Persons who buy real estate for investment purposes or second homes may also have to pay high interest rates. So will those who buy certain kinds of homes such as mobile homes and condominiums. Lenders charge higher interest rates on those homes because they believe there is a greater risk of foreclosure on such structures 

How to Get the Average Interest Rate

The way to get the average interest rate on your next mortgage is ask for it. Borrowers should go online and determine what the average mortgage interest rate before going mortgage shopping. Once armed with this information, a borrower can reject a mortgage on which the interest rate is too high.

A borrower can also tell a lender that they will not accept interest rate other than the standard interest rate. The lender might lower an interest rate match the average in order to get your business.
Learning the average interest rate is vital if you are planning to shop for a mortgage.