In this wide and varied United States of America, it turns out that not all mortgage rates are created equal. Mortgage interest rates can vary from state to state for several reasons, some micro and others macro. These are the states with the highest and lowest rates, compared to the national average rate of 3.84% *. Many people assume that the Federal Reserve (the Fed) sets mortgage rates.
They don't, but the Federal Reserve does influence rates. The Federal Reserve controls short-term interest rates by raising or reducing them depending on the state of the economy. While mortgage rates are not directly linked to Fed rates, when the Fed rate changes, the prime mortgage rate usually follows suit soon after. Mortgages, on the other hand, track the 10-year Treasury rate.
Changes in the federal funds rate may or may not move the rate of 10-year Treasury bonds, which are issued by the government and take a decade to expire. If you deposit less than 20% in a home, the mortgage rate can increase and you'll often have to pay for mortgage insurance. A state's economic health influences its foreclosure rate, a key variable for mortgage lenders who do business there.