What Moves Mortgage Rates
Mortgage rates are not directly controlled by the Federal Reserve — they're market-determined, primarily tracking the yield on 10-year US Treasury bonds plus a spread (the mortgage spread, which accounts for prepayment risk and default risk). When the 10-year Treasury yield rises, mortgage rates typically follow within days.
Key factors that push rates up: stronger-than-expected inflation data, strong employment reports (suggesting the Fed will keep rates higher), and growing federal deficit (more Treasury supply = lower prices = higher yields). Factors that push rates down: weaker economic data, falling inflation, Federal Reserve signalling rate cuts, and global risk-off events (investors buying safe Treasury bonds).
What Determines Your Personal Rate
| Factor | Impact |
|---|---|
| Credit score | Largest factor. 740+ typically qualifies for best rate. Below 620 may not qualify for conventional. |
| Down payment | 20%+ avoids PMI and typically improves rate. Less than 20% adds PMI cost. |
| Loan type | 30yr fixed vs 15yr fixed vs ARM — each has different base rates |
| Property type | Primary residence gets best rates; investment property adds 0.5–1.0% |
| Loan-to-value ratio | Lower LTV = better rate. Putting down 25% vs 20% can improve rate. |
| Debt-to-income ratio | Below 43% for most conventional loans; lower DTI improves eligibility |
APR vs Interest Rate
The interest rate is the base borrowing cost expressed annually. The APR (Annual Percentage Rate) includes the interest rate plus lender fees — origination fees, points, and other charges — expressed as a single annual rate. APR is a more complete picture of your borrowing cost.
When comparing lenders, compare APR — not just the interest rate. A lender offering 6.5% rate with $4,000 in fees might have a higher APR than a lender offering 6.75% with $0 fees, depending on your loan term. Over a 30-year loan, the lower-fee option is often cheaper even at a slightly higher rate.
How to Compare Lenders Properly
Get a Loan Estimate (standardised form required by CFPB) from each lender within a short window (2 weeks) — multiple mortgage inquiries within 14–45 days count as a single hard pull on your credit. Compare the Loan Estimate documents side by side:
- Interest rate and APR
- Origination charges (lender fees)
- Third-party charges (title, appraisal)
- Total closing costs (lender-controlled vs fixed)
- Cash to close
Lenders are required to honour the Loan Estimate or notify you of changes within 3 business days. Comparing 3–5 lenders is the most reliable way to ensure you're not leaving money on the table. CFPB mortgage rate tool at consumerfinance.gov.
Understanding Rate Locks
A rate lock freezes your interest rate for a set period — typically 30–60 days, occasionally 90–120 — protecting you from rate increases between application and closing. Rate locks are typically free for 30–45 days; longer locks may add 0.125–0.25% to your rate.
If rates fall significantly after you lock, some lenders offer a float-down option — a one-time ability to lower your rate if market rates drop by a specified amount before closing. This typically costs extra and has conditions; evaluate whether the protection is worth the cost in your rate environment.
Mortgage Markets Globally
UK: UK mortgages typically have 2–5 year fixed terms (not 30-year fixed as in the US) — after the fixed term, the rate reverts to the lender's Standard Variable Rate (SVR) or you remortgage. UK mortgage rates are quoted as an interest rate above the Bank of England base rate. The FCA regulates mortgage lenders at fca.org.uk. Mortgage comparison sites (MoneySuperMarket, Trussle) make comparison straightforward.
India: Indian home loans are typically floating rate linked to the repo rate (Reserve Bank of India benchmark). Fixed rate home loans are less common. Major lenders: SBI, HDFC Bank, ICICI Bank, LIC Housing Finance. Home loan rates in 2026: approximately 8.5–10% for prime borrowers. LTV ratios are regulated by RBI — typically 75–80% for loans above ₹30 lakh. RBI at rbi.org.in.
Canada: Canadian mortgages are typically 5-year fixed or variable rate terms (not 30-year fixed). The amortisation period can be 25–30 years, but the rate resets at each renewal. The stress test requires borrowers to qualify at the contract rate + 2% (or 5.25%, whichever is higher) to ensure affordability at higher rates. Insured mortgages (less than 20% down) have a maximum 25-year amortisation and require CMHC mortgage insurance. FCAC at canada.ca.