Mortgage rates remain near 7%

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Mortgage Rates by State

The lowest mortgage rates available vary depending on the state where originations occur. Mortgage rates can be influenced by state-level variations in credit score, average mortgage type and size, in addition to the different risk management strategies of individual lenders.

The states with the cheapest 30-year new purchase rates Tuesday were New York, Hawaii, Alaska, Utah and Louisiana, while the states with the highest average rates were Washington, D.C. ; Iowa, South Carolina; Maryland; North Dakota; and Virginia.

What causes mortgage rates to rise or fall?

Mortgage rates are determined by a complex interplay of macroeconomic and sector factors, such as:

Since fluctuations can be caused by several of these factors at once, it is usually difficult to attribute the change to a single factor.

Macroeconomic factors have kept the mortgage market relatively low for much of 2021. In particular, the Federal Reserve has purchased billions of dollars of bonds in response to economic pressures from the pandemic. This bond purchasing policy has a major influence on mortgage rates.

But starting in November 2021, the Fed began reducing its bond purchases downward, making deep reductions each month until reaching net zero in March 2022.

Between then and July 2023, the Fed aggressively raised the federal funds rate to combat decades-long high inflation. Although the federal funds rate can influence mortgage rates, it does not directly. In fact, the federal funds rate and mortgage rates can move in opposite directions.

But given the historic speed and magnitude of the Fed's rate hikes in 2022 and 2023 – raising the benchmark rate by 5.25 percentage points over 16 months – even the indirect influence of the federal funds rate has resulted in a dramatic upward impact on mortgage rates over the past two months. years.

The Fed has kept the federal funds rate at its current level since July, with a sixth consecutive hold announced on May 1. Although inflation has fallen significantly, it remains above the Fed's 2% target. Until the central bank is convinced that inflation is falling sufficiently and sustainably, it is reluctant to start cutting rates.

The Fed will hold five additional meetings this year, with the next scheduled to end on June 12.

How we track mortgage rates

The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming an 80% loan-to-value (LTV) ratio (i.e., at least 20% down payment) and an applicant's credit score in the 680-739 range. The resulting rates are representative of what customers should expect when receiving actual quotes from lenders based on their qualifications, which may differ from advertised rates. © Zillow, Inc., 2024. Use subject to Zillow Terms of Service.