how much does the interest rate matter say you want to buy a house that costs 436 000 that s the nationwide average price as of mid july 2023 you put 87 200 or 20 down you need to finance 348 800 a mortgage calculator makes this easy 
your monthly payment on a 30 year mortgage would be the biggest single factor that determines mortgage rates and all other borrowing rates in the u s is the federal reserve s decision on the rates it charges banks in order to maintain the stability of the system all other loan rates are based on these rates which are set at meetings held every six weeks mortgage rate indicators to keep an eye ongiven the impact of interest rates on monthly living costs people who are considering buying a home are wise to keep an eye on the direction of these rates there are a few indicators to follow the prime rate is one indicator this rate represents the lowest average rate banks are offering for credit banks use the prime rate for interbank lending and may also offer prime rates to their most creditworthy borrowers the prime rate tends to follow trends in the federal reserve s federal funds rate it is usually about 3 higher than the current federal funds rate another indicator for borrowers is the 10 year treasury bond yield this yield helps to show market trends in interest rates if the bond yield rises mortgage rates typically rise as well the inverse is the same if the bond yield drops mortgage rates will usually also drop even though most mortgages are calculated based on a 30 year timeframe many mortgages are either paid off or refinanced for a new rate within 10 years therefore the 10 year treasury bond yield can be an excellent standard to judge and of course you can keep an eye on the trends in mortgage rates freddie mac updates mortgage rate changes on its site weekly determining a mortgage ratea lender assumes a level of risk when it issues a mortgage for there is always the possibility a customer may default on the loan there are a number of factors that go into determining an individual s mortgage rate and the higher the risk the higher the rate a high rate ensures the lender recoups the initial loan amount at a faster rate in case the borrower defaults protecting the lender s financial investment the borrower s credit score is a key component in assessing the rate charged on a mortgage and the size of the mortgage loan a borrower can obtain a higher credit score indicates the borrower has a good financial history and is more likely to repay debts this allows the lender to lower the mortgage rate because the risk of default is deemed to be lower 