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Back in 2020 and 2021, we saw mortgage rates drop to historic lows during the COVID-19 pandemic. I mean, we're talking rates below 3% that nobody thought we'd see again. Since then, inflation pushed rates above 6%. And while they've come down a bit from the highs we saw in 2023, they're still making a lot of folks nervous.
Here's the thing though: you don't have to wait for interest rates to drop before buying a home. I get it, this sounds counterintuitive when everyone's talking about how rates were so much lower a few years ago. But I'm going to walk you through this in a way that actually makes sense for your situation.
While rates are higher than they were five years ago, they're honestly well within the historical norm. According to Freddie Mac's Primary Mortgage Market Survey, the average 30-year fixed mortgage rate currently sits at 6.22%.
Compare that to April 1990 when rates averaged 10.26%. Or even April 2000 when they hit 8.20%.
Think of it like this: mortgage rates don't just randomly go up and down. There's a whole system at work. Understanding it helps you make better decisions about when and how to buy.
The Bond Market Connection
Mortgage rates are based on demand for mortgage-backed securities in the bond market. When investors expect an increase in defaults on the mortgages that make up these securities, bond yields and interest rates may increase to keep current investors from selling and attract new ones.
It's basically supply and demand. But for loans.
Federal Reserve Influence
The Federal Reserve's mandate is to maximize employment and stabilize prices. The primary tool it uses? Changing the target range for the federal funds rate. When the target range goes up, mortgage rates typically increase too.
As of October 2025, the Fed has set the federal funds rate at a range of 3.75% to 4.0% following a quarter-point cut. According to the Federal Reserve's September 2025 meeting minutes, policymakers are carefully balancing inflation concerns with softening labor market conditions.
Inflation's Role
A little bit of inflation keeps the economy going. Too much can make your money worth less than when you earned it. The U.S. Bureau of Labor Statistics reported that the Consumer Price Index increased 3.0% over the 12 months ending September 2025.
A higher federal funds rate makes it more expensive to borrow money, which helps cool down spending and brings prices back in line.
In my Master’s of Social Work (MSW) program, we learned how financial stress affects families emotionally. I've seen firsthand through my work how rate anxiety can paralyze people who are otherwise ready to buy. That's why I'm passionate about breaking down these concepts in practical terms.
Economic Growth Patterns
In boom times, unemployment is low enough that employers struggle to find workers. This leads to higher wages.
Higher wages mean people may be willing to pay more for goods and services, which feeds inflation. The Fed may raise rates to slow economic growth and tamp down inflation before it gets out of control.
To give you better context for how mortgage rates have risen and fallen over time, here's a look at the average interest rate for a 30-year fixed-rate mortgage over the past few decades:
April 2025: 6.64%
April 2020: 3.33%
April 2015: 3.30%
April 2010: 5.08%
April 2005: 5.93%
April 2000: 8.20%
April 1995: 8.41%
April 1990: 10.26%
April 1985: 13.27%
Source: Freddie Mac Primary Mortgage Market Survey, accessed November 6, 2025
When I look at this table, I always think about the people who bought homes in 1985 at 13%+ rates. They still built wealth. They still became homeowners. The rate wasn't what mattered most. It was the decision to start building equity instead of waiting for the perfect moment.
The interest rate you're offered on a mortgage depends on a combination of factors. Some you have control over. Some you don't.
Let me walk you through both sides of this equation.
A home buyer can't control the interplay between the housing market, economic growth, the Federal Reserve, or inflation. If your home purchase happens to coincide with lower interest rates, you can save money with a fixed-rate loan. If market rates are higher when you buy, it may limit your ability to afford a home initially.
But here's the good news: if you can afford a home at today's rates, it's absolutely possible to refinance when interest rates fall. I've seen plenty of buyers do exactly this over my years in the industry.
Wait, actually I should clarify that. You can't just refinance anytime you want. You need equity built up in the home, typically at least 5-10%, and you need to qualify for the new loan based on your current financial situation. But yeah, refinancing is definitely an option if rates drop.
You do have control over how you manage your finances. This is where you can really make a difference.
Lenders look closely at your credit score and how much you can afford for a down payment to determine what interest rate to offer you.
Credit Score Impact
Borrowers with a higher credit score typically get offered lower rates. According to data from the Consumer Financial Protection Bureau, even a 20-point difference in credit score can affect your rate by 0.25% or more.
That adds up to thousands of dollars over the life of your loan.
If you make a larger down payment, lenders may offer a lower rate because your larger stake in the property suggests you're less of a risk. It's that simple.
Property Usage Matters
It also matters how the home will be used. You'll get a lower rate when buying your primary residence. Lenders expect that if you get into financial trouble, you'll prioritize the payment on the home you live in.
You can expect to pay a slightly higher rate on a loan for a second home or investment property, usually anywhere from 0.50% to 0.75% higher.
Just because interest rates aren't as low as they once were doesn't mean buying a home is out of reach. I work with buyers every day who are successfully navigating this market.
Here are the steps that actually work.
A higher interest rate means a higher monthly payment. That's just math.
But you can plan for it. Use AmeriSave's mortgage calculator to see how your interest rate will affect your monthly payment and how much you can afford to spend on a home.
Here's a real example: On a $300,000 mortgage at 6.22%, your monthly principal and interest payment would be approximately $1,841. At 7%, that same loan would cost you $1,996 per month. That's a difference of $155 monthly. Or $1,860 annually.
A good credit score can earn you a lower rate. Period.
Be sure to check your report for accuracy and dispute any errors. I've seen borrowers improve their scores by 30-40 points just by correcting mistakes on their credit reports. That can translate to thousands in savings.
Fixed-Rate Mortgages
A fixed-rate mortgage will lock in your rate when you close. Your payment stays the same for the entire loan term. This gives you predictability. Makes budgeting easier.
Adjustable-Rate Mortgages (ARMs)
With an adjustable-rate mortgage, you start off with a slightly lower rate that adjusts every so often. If you expect interest rates to drop in the next few years, you might consider an ARM and benefit from the lower introductory rate.
According to Zillow's rate data, 5/1 ARMs are currently averaging around 6.47%. While 30-year fixed rates average 6.15%. Not a huge difference right now, which is somewhat unusual.
Government-Backed Loans
Don't overlook FHA, VA, and USDA loans if you qualify. These programs often offer more flexible credit requirements and lower down payment options. At AmeriSave, we work with all these loan types. We can help you determine which makes the most sense for your situation.
If you're buying a home in a buyer's market, where supply exceeds demand, you may have leverage to negotiate better terms. While you still may pay the current market rate, you might be able to convince the seller to pay some of your closing costs. Or offer other concessions that reduce your upfront expenses.
Here in Louisville, I've seen buyers sucessfully negotiate seller concessions even in competitive neighborhoods when they come in strong with preapproval and a solid offer. The key is showing sellers you're serious.
Another way to reduce your interest rate is to purchase mortgage points. With points, you pay more upfront in exchange for a lower interest rate. One point typically equals 1% of the total loan amount. Though the amount that your interest rate is reduced will depend on the lender.
Here's how the math works: On a $300,000 loan, one point costs $3,000. If that point reduces your rate by 0.25% (from 6.22% to 5.97%), you'd save about $45 per month. Or $540 annually. You'd break even on the point purchase in about 5.5 years.
If you plan to stay in the home longer than that, points can make financial sense.
At AmeriSave, we can walk you through the calculation to see if points make sense for your specific situation.
You can't control what the market will be like when you finally become financially and emotionally ready to buy your first home. You may hear people say it's a good time to buy with interest rates low. But if you haven't saved enough to make a down payment and won't be able to keep up with your mortgage, it's not a good time to buy for you personally.
Some buyers try to time the market. They hold off on buying until interest rates drop, even when they can afford to buy in current market conditions.
Here's the problem with this method: you miss the opportunity to build equity.
Let me give you a real scenario. Say you're renting for $2,000 per month while waiting for rates to drop from 6.5% to 5.5%. That might take two years, maybe? I honestly don't know for sure. Economists can't even agree on rate predictions most of the time. But let's say it does take two years.
In those two years, you'll have spent $48,000 on rent with zero equity to show for it.
Meanwhile, if you had bought at 6.5%, you'd have built approximately $15,000 in equity over those same two years (assuming typical appreciation). Plus you'd have the tax benefits of homeownership. Yes, you'd have a slightly higher payment. But you're building wealth instead of just paying someone else's mortgage.
It's often said that the best time to buy is when you can afford to. I completely agree with this. But let me add some nuance.
You should buy when:
Remember, there are other factors at play beyond just interest rates. If you're looking to buy in a local developing market, there may be incentives and motivated sellers. You can take the mortgage rate you can get now. And refinance if rates fall in the future.
Only time will tell if rates drop, remain steady, or increase in the next few years. If you plan on making a home purchase now, consider these proven tips to make the most of your money.
It's always a good idea to shop around for a lender and compare different offers to make sure you're getting the best loan terms. When choosing a mortgage lender, consider rates, loan terms, the lender's reputation, and the service you'll receive.
After all, you'll likely be making payments on your home for a long time. Working with a lender you can trust is crucial.
Be sure to compare apples to apples regarding the type of loan. Don't compare a 15-year quote to a 30-year quote, for example.
Get Preapproved to Strengthen Your Position
Once you find a lender, take the time to get preapproved. This will tell you how much the lender is tentatively willing to loan you up to a certain amount. Having a preapproval helps you better understand how much home you can afford. And shows sellers that you're a serious buyer who can secure financing.
In competitive markets, sellers often won't even consider offers without preapproval letters. It's become table stakes.
Many lenders, including AmeriSave, offer a mortgage rate lock. This allows homeowners to secure a set interest rate during loan processing.
If interest rates rise in the interim before closing on your mortgage, you'll keep the rate you locked in.
But keep in mind that you'll only reap the benefits of a mortgage rate lock if you can close on your loan during the lock period. Otherwise, your locked rate may expire. Rate locks typically last 30 to 60 days, depending on the lender.
At AmeriSave, we offer a 30-day rate lock with no fee or impact to your locked rate. This gives you protection without added costs.
We touched on this earlier. But it's worth digging deeper.
Buying mortgage points from your lender can lower your interest rate through an upfront fee. One point is typically equal to 1% of the total loan amount. So one point on a $300,000 loan would be $3,000.
Lenders usually allow you to buy multiple points or fractions of points. But the amount that each point reduces your interest rate varies by lender. The key is calculating your break-even point:
Break-even calculation: Cost of points ÷ Monthly savings = Months to break even
If you're buying a forever home or plan to stay put for at least 5-7 years, points often make sense. If you're likely to move or refinance within a few years, you might not recoup the upfront cost.
If you get a mortgage while interest rates are higher than you'd prefer, remember that you can refinance when they go back down. And if waiting on mortgage refinancing while buying now means securing your dream home and building equity sooner, paying more interest in the meantime is probably worth it.
I see this all the time. Buyers who purchased at 6.5% or 7% rates in 2023 are now looking at refinance options as rates have dropped into the 6% range. They didn't wait on the sidelines. They bought when they were ready. And are now positioned to lower their payments.
Let me get a little more technical here because I think understanding the current landscape helps you make better decisions. Or at least I hope it does.
Mortgage rates closely follow the 10-year Treasury yield. According to data from the U.S. Department of the Treasury, the 10-year Treasury note is currently hovering around 4.08%.
When the 10-year yield goes up, mortgage rates typically follow within a few days or weeks. When it goes down, mortgage rates often (but not always) decrease as well. The spread between the 10-year Treasury and mortgage rates is typically around 1.5% to 2.0%. Though it can vary based on market conditions.
According to Fannie Mae's Economic and Strategic Research Group, economists anticipate rates will average around 6.3% by the end of 2025. With a potential dip to 6.2% by the first quarter of 2026.
The Mortgage Bankers Association has a slightly more conservative outlook. Seeing Q4 2025 averaging 6.4% and holding steady into Q1 2026. With further moderation expected later down the line.
Here's my take: predictions are just that, predictions. I wouldn't base my entire home buying decision on what economists think might happen. Focus on what you can control: your finances, your readiness, and your long-term plans.
Let's look at actual numbers from early November 2025:
Source: Freddie Mac Primary Mortgage Market Survey, accessed November 6, 2025
Notice that 15-year rates are noticeably lower than 30-year rates. About 0.72 percentage points lower. If you can afford the higher monthly payment, a 15-year mortgage builds equity much faster. And costs significantly less in total interest.
Let me show you what different interest rates actually mean in real dollars and cents. Sometimes seeing the numbers makes it click.
At 6.22% (30-year fixed):
At 5.50% (15-year fixed):
At 7.00% (30-year fixed):
The difference between 6.22% and 7.00% is $155 per month. Or $55,800 over 30 years. That's significant. But it's also why refinancing when rates drop makes so much sense.
At 6.22% (30-year fixed):
At 5.50% (15-year fixed):
Notice how much faster you build equity with the 15-year loan, even though the monthly payment is higher. If you can swing it, the 15-year option saves you $332,280 in interest compared to the 30-year loan.
Honestly, when I first saw these numbers myself, I had to double-check them. The interest difference seems almost unbelievable. But the math checks out.
Getting a low interest rate can save you money. There's no question about that.
But you can't control where market rates are when you're ready to buy. If you have the money to make a down payment and afford your mortgage comfortably, you don't have to put off becoming a homeowner.
Here's what I want you to remember: Current interest rates are considered normal historically. We got spoiled by the ultra-low rates of 2020-2021. But those were the anomaly. Not today's rates. At 6.22%, you're paying less than borrowers paid in most decades throughout modern history.
You can always refinance to a lower rate later if rates drop. Meanwhile, you're building equity instead of paying rent. You're getting tax benefits. And you're locking in your housing costs instead of facing annual rent increases.
If you find your dream house, don't let rising rates stop you from realizing your dream. The best time to buy is when you're financially ready and find the right property. Everything else, including interest rates, is secondary to those two factors.
At AmeriSave, we specialize in helping buyers navigate whatever market conditions they're facing. Our digital tools make it easy to explore your loan options. Get preapproved. And understand exactly what your monthly payment will be. We're here to help you figure out what works for your unique situation.
Ready to explore your options? Find out how much home you can afford in 2025 with AmeriSave.
Mortgage rates have remained above 6% since mid-2022, when the Federal Reserve increased the federal funds rate to reduce inflation. While these rates may seem high compared to the record-low mortgage rates seen in 2020 at the height of the COVID-19 pandemic, historical rates have been much higher.
For context, the average mortgage rate on a 30-year mortgage peaked at 18.44% in October 1981, according to Freddie Mac historical data. The current 6.22% average is actually below the long-term historical average of around 7.5% to 8% that we saw throughout much of the 1990s and 2000s.
The Federal Reserve's September 2025 meeting minutes indicate that policymakers are carefully monitoring both inflation (currently at 3.0% annually) and labor market conditions before making additional rate adjustments.
Economists make predictions. But it's honestly hard to definitively say where mortgage rates are headed because it often depends on the market and economic policy that can shift quickly. If the Federal Reserve continues lowering the federal funds rate through the remainder of 2025, that could lead to lower mortgage rates.
During the first Fed meetings of 2025, officials decided to keep rates steady before implementing cuts starting in September. As of October 2025, the federal funds rate sits at 3.75% to 4.0% following a quarter-point reduction.
Most forecasts from major institutions like Fannie Mae and the Mortgage Bankers Association suggest rates will hover in the 6.2% to 6.4% range through early 2026. With potential for gradual decreases later in the year. But remember, these are educated guesses. Not guarantees.
It never hurts to shop around. Mortgage lenders are competitive in their pricing. You might find significant differences between lenders.
The question of how to get the best mortgage rate also comes down to personal financial factors like your credit score and down payment size.
Unlike the market itself, these are aspects of rates that are entirely within your control. Focus on improving your credit score. Increasing your down payment if possible. And reducing your debt-to-income ratio. These actions can lower your rate by 0.50% to 1.00% or more. Which is a bigger impact than waiting for market rates to drop.
At AmeriSave, we offer competitive rates and a streamlined digital process that helps you compare options quickly. Our technology makes it easy to see exactly what rate you qualify for without a hard credit pull initially.
The most recent data from Freddie Mac for the week ending November 6, 2025, shows that the average rate on 30-year fixed-rate mortgages is 6.22%. However, rates can vary widely depending on your loan term, the size of your down payment, whether you'll live in the home, and whether your rate is fixed or variable.
Your actual rate will depend on your credit score, debt-to-income ratio, loan-to-value ratio, and other personal factors. That's why getting a personalized quote is so important. The national average gives you a ballpark. But your individual rate could be higher or lower based on your specific situation.
If you're ready to buy a home and anticipate increasing rates or want protection from volatility, lock your rate as soon as possible after you have an accepted offer. That way, if rates rise between the time it takes to close on your mortgage, you'll still get to keep the original lower rate.
Most rate locks last 30 to 60 days. At AmeriSave, we offer a 30-day rate lock with no fee. Giving you protection during the critical period between acceptance and closing.
Some lenders also offer "float-down" options, which allow you to lock in a rate but still take advantage if rates drop before closing. This typically comes with an additional fee. So weigh the cost against the potential benefit.
This depends entirely on your financial situation and goals. A 15-year mortgage currently offers rates about 0.72 percentage points lower than 30-year mortgages. On a $300,000 loan, you'd save more than $220,000 in total interest with the 15-year option.
However, your monthly payment would be about $610 higher with the 15-year term. If that payment fits comfortably in your budget and you want to build equity faster, the 15-year mortgage is a powerful wealth-building tool.
If you need the lower monthly payment to maintain financial flexibility or want to invest the difference elsewhere, the 30-year mortgage might be the better choice. There's no one-size-fits-all answer here.
While you can buy a home with as little as 3% down on conventional loans or 3.5% on FHA loans, putting down more typically gets you a better rate. The biggest rate improvement usually happens when you put down 20% or more. Eliminating the need for private mortgage insurance (PMI).
According to Fannie Mae's guidelines, borrowers who make larger down payments are viewed as lower risk. Which translates to better rates. Often 0.25% to 0.50% lower than minimal-down-payment loans.
That said, don't deplete your entire savings to reach 20% down. You need emergency reserves. And money for closing costs, moving expenses, and home maintenance. It's all about finding the right balance.
Absolutely. And this is a strategy many successful home buyers use. If you buy now at 6.22% and rates drop to 5.5% next year, you could refinance and lower your payment. Refinancing does come with closing costs (typically 2% to 5% of the loan amount). So you'll want to calculate whether the monthly savings justify the upfront expense.
The general rule is that refinancing makes sense if you can lower your rate by at least 0.50% to 0.75%. Though this depends on your specific situation and how long you plan to stay in the home.
At AmeriSave, we make the refinance process just as easy as the purchase process. With digital tools and streamlined underwriting that get you to closing faster.
Your interest rate is what you pay to borrow money, expressed as a percentage. Your APR (Annual Percentage Rate) includes your interest rate plus other loan costs like origination fees, discount points, and some closing costs. Expressed as a yearly rate.
For example, you might see a loan advertised at 6.22% interest but with a 6.45% APR once all the fees are included. The APR gives you a better comparison tool when shopping between lenders because it accounts for the total cost of the loan. Not just the interest rate.
It depends on how long you plan to keep the loan. If you're confident you'll stay in the home (or keep the mortgage) for at least 5-7 years, buying points to reduce your rate can save you money over time.
However, if there's a chance you'll refinance when rates drop in the next few years, paying points now might not make financial sense. Because you won't have time to recoup the upfront cost through monthly savings.
Run the break-even calculation: divide the cost of the points by your monthly savings to see how many months it takes to break even. If that timeframe aligns with your plans, points can be a smart move.
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