What is a Mortgage Rate?
A mortgage rate is the rate of interest a borrower pays on his or her mortgage.
How Does a Mortgage Rate Work?
Mortgage rates can be either fixed or variable. The terms and conditions related to the mortgage rate are outlined in detail in the mortgage loan documents.
A fixed-rate mortgage charges the borrower the same interest rate over the entire life of the loan. The rate on an adjustable-rate mortgage (ARM), also known as a 'variable-rate mortgage' or 'floating-rate mortgage,' fluctuates according to prevailing interest rates.
[If you're ready to buy a home, use our Mortgage Calculator to see what your monthly principal and interest payment will be based on the interest rate.]
Why Does a Mortgage Rate Matter?
Mortgage rates tend to track 10-year Treasury rates. If Treasury rates go up, mortgage rates go up, and vice versa. Mortgage lenders also adjust mortgage rates according to the creditworthiness of the borrower. More risky borrowers are charged higher rates, while more creditworthy borrowers are charged lower rates.