Decoding Mortgage Interest Rates

If you’re a first-time homebuyer searching the web to see current mortgage rates, the info you find might feel a little overwhelming. You’ll see lists of different rates and various options for mortgage types and lenders. There may be terminology you’re not familiar with, and it can be hard to figure out which of the rates you see on the screen are the ones that you can qualify for. In this article, we’ll go through Mortgage Rates 101 to help you feel more confident when taking the next steps toward finding the home (and home financing) that’s right for you.

What is an Interest Rate on a Mortgage?

A mortgage interest rate represents the cost of borrowing money to finance the purchase of a home over a specific period of time. When looking at mortgage rates, you’ll also see APR (Annual Percentage Rate), which represents the yearly interest charged on a loan. This can include the mortgage rate plus any additional fees, such as loan origination fees, private mortgage insurance, and closing costs. 

Mortgage rates can be fixed, variable, or adjustable. A fixed-rate mortgage maintains the same interest rate throughout the entire loan term (most often a 15- or 30-year term). A variable or adjustable-rate mortgage (ARM) are mortgage types that have a fixed-rate for a set amount of time followed by a period where the interest rate can change based on market conditions.

What Affects Mortgage Rates?

Mortgage rates can be influenced by a combination of factors, including the overall health of the U.S. economy, inflation rates, and decisions made by the Federal Reserve. When the economy is strong and the demand for loans is higher, mortgage rates tend to go up. Inflation concerns can also lead to higher rates as the Federal Reserve may raise interest rates in an effort to slow inflation. Additionally, the global economy, the credit market (the market where debt securities, loans, and other financial products are bought and sold), and the 10-year Treasury yield can play roles in determining mortgage rates.

The Impact of Home Mortgage Rates on Buying Power

Mortgage rates have a significant impact on buying power. With lower rates, a buyer's purchasing power can increase because the interest portion of the mortgage payment is less, which means that more of the payment can go toward paying the purchase price of the home. It's important to note that what’s considered a low or high mortgage rate can depend on economic conditions and historical context. However, there are ways to secure a below-market rate during higher rate periods, such as taking advantage of an interest rate buydown if available.

Here's a look at how interest rates can impact the monthly mortgage payment on a home.

How to Qualify for a Home Loan


Meritage’s preferred lender, MTH Mortgage*, offers competitive rates and can help you determine what you can afford. Additionally, you can use Meritage’s monthly payment calculator to help you calculate your all-in monthly costs.

Asking the Right Questions

Knowledge is power. As you start to move through your homebuying journey, it’s a good idea to ask questions and make sure you’re getting the answers needed to ensure you’re making the best decisions. Here are a few suggestions on what to ask: 

- What types of home loans do I qualify for? 

- What is the lowest mortgage rate I can lock in and what is the corresponding annual percentage rate (APR)? 

- How much do I need to put down to qualify for the low interest rate? 

- What will my monthly payment be? Will it fluctuate in any way? 

Now that you understand the basics of mortgage interest rates and the impact they will have on your purchase power, learn more about the buying process by visiting Buyer Resources section of our site or by visiting MTH Mortgage* to get pre-approved today.  

*By clicking on this link, you will be accessing the MTH Mortgage website. Meritage has no responsibility for the content or administration of this website.