Thursday's mortgage rate averages showed a divide in the United States. Seven states recorded some of the cheapest rates for a new 30-year purchase mortgage. These included New York, California, Virginia, Washington, Colorado, Massachusetts, and Pennsylvania, with averages ranging from 6.57% to 6.78%.
Another set of states, namely Alaska, Alabama, South Dakota, Kansas, West Virginia, and Wyoming, along with a cluster of others including Oklahoma and Iowa, marked the top end of the scale. Their 30-year new purchase rates landed between 6.89% and 6.96%.
These considerable differences reflect the various factors at play in each region. Factors such as credit score averages, typical loan size, and state-specific regulations come into the mix. Lenders' risk management strategies also play a part in influencing the rates they offer.
The rates painted in this divider don’t exactly match the enticing ones often touted online. Most of the time, those are chosen based on their appeal, and may require points to be paid upfront or are predicated on hypothetical borrowers who have excellent credit scores or smaller-than-usual loans. The rate you end up securing will mainly hinge on your credit score, income, and several other factors.
After a four-day incremental increase, 30-year new purchase mortgage rates maintained their average at 6.83% on Thursday. The present rates are a significant improvement from those in mid-May, which saw a one-year high of 7.15%. However, the measures were friendlier in March, with 30-year rates dropping to an annual low of 6.50%. In September, rates hit a two-year trough of 5.89%.
Mortgage rates are influenced by a cross-section of macroeconomic and industry factors. Bigger picture elements kept the mortgage market relatively subdued for much of 2021 due to the Federal Reserve's proactive bond purchases in response to economic distress caused by the pandemic. In November 2021, the reduction of these bond purchases began, hitting net zero by March 2022.
Through July 2023, the Fed significantly increased the federal funds rate to combat inflation. While this rate does not directly impact mortgage rates, it can indirectly cause significant rises, especially when increased rapidly like in 2022 and 2023.
After maintaining this peak level for nearly 14 months, the central bank announced the first rate cut of 0.50 percentage points in September. It then continued the trend with quarter-point reductions in November and December. However, as of the fourth meeting of the current year, the Fed decided to keep rates steady, indicating potential rate hold announcements in the future.
The national and state averages outlined above are provided by Zillow's Mortgage API. These rates are based on a loan-to-value (LTV) ratio of 80% and a credit score in the 680–739 range among applicants. These figures should be used as a guide by borrowers when, seeking quotes from lenders, as it is likely different from advertised teaser rates.