Mortgage Interest Rates - Everything You Need to Know

When you secure a mortgage loan and buy a home, your monthly payment doesn’t just go toward the principal. Interest is included in that payment. What your interest rate will be is determined by several factors. Let’s take a closer look.

What Is a Mortgage Loan?

A mortgage loan is a loan that uses the property as collateral. But the borrower does not have to use the loan just to purchase a home. The borrower can use the loan in any way they wish. It can be used to build or purchase a house, make repairs, build a garage, or even take a vacation. It is up to the borrower.

Once you obtain the mortgage loan, you will have to make payments to pay it back. These payments are made up of principal and interest. And, just like any other loan, if you default, your collateral goes to the lender so they can recoup their losses.

What Determines Mortgage Interest Rates?

What you can control about your interest rate

There are several factors that determine your interest rate. But the one that you have the most control over is your credit history and credit score. A credit score is a three-digit number ranging from 300-850. The higher the number, the better your score. A high score shows lenders you are a good lending risk, and the lower your interest rate from them will be.

Credit scores are calculated by looking at five aspects of your spending and debt habits: 

  • Payment history

  • How much debt you have

  • The length of your credit history

  • How much new credit you have taken on recently

  • What types of credit you have

There are three major credit bureaus, Equifax, Experian, and TransUnion. These companies keep track of your entire credit history. 

Generally, if your credit score is 700 or higher, you will be able to qualify for almost any type of home mortgage loan. 

What you can’t control about your interest rate

The current market rates are controlled by the overall economy. When the economy is in an upswing, borrowers have more money and can afford more. This affects the real estate market and causes interest rates to rise.

On the other hand, when the economy is in a downturn, few people are employed, there is less ready cash, and interest rates go down to make it easier for borrowers to qualify for a loan they can afford.

Why Is My Mortgage Rate Higher Than Average?

More than just the two stated above, many factors affect your mortgage interest rate. Interest rates vary by location. They change not only depending on the state in which you are looking to buy, but they can also vary greatly depending on where you are in that state.

Likewise, mortgage interest rates also vary according to which lender you choose. Another determining factor is the length of your loan. Shorter 15-year loans have a higher interest rate than the more commonly used 30-year mortgage loans. An easy way to figure out what your interest rate and overall monthly payments could potentially be is to use a mortgage calculator.

Mortgage calculator

A mortgage calculator helps determine your monthly mortgage or home loan payment. Enter your loan amount, down payment, interest rate, loan type, and length of your loan. The calculator takes that information and gives you your monthly payment amount.

A mortgage calculator is great for helping you decide how much of a down payment to make. The more you put toward your down payment, the less you need to borrow. And, borrowing less means there is less interest to pay and a lower interest rate. 

Mortgage Interest Rates: 2022

So far, for 2022, interest rates have been rising, but the trend seems to be reaching its climax. At the end of the third week of August 2022, interest rates for a 30-year, fixed-rate mortgage averaged 5.13%. Last year at this time, the average rate was 2.86%.

According to Freddie Mac, the rest of the year’s home purchase demand will most likely drag. This will cause the supply of purchasable homes to increase slightly. The law of supply and demand states that prices should begin decreasing.


The interest rate on your mortgage loan is determined by many things, such as location, the economy, the lender you choose, and your credit score. To determine your interest rate and, therefore, your mortgage payment, it’s best to use a mortgage calculator.

If you would like assistance with determining which mortgage is best for you, contact us today. MortgageWorks offers financing for new home purchase, refinance, home equity, investment property, construction, and a wide variety of loan program options to fit your every need.

Servicing California and the entire Coachella Valley, including Palm Springs, Cathedral City, Rancho Mirage, Indian Wells, Palm Desert, Desert Hot Springs, La Quinta, Indio, and Coachella. Call Art today at (760) 883-5700

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.