We know that the mortgage rate a property buyer lands depends on a lot of different factors ranging from credit score to debt-to-income ratio to the actual property. It even depends on the specific mortgage lender you choose. But a recent study shows that mortgage rates are actually tied to the state where the borrower is applying for the loan.
LendingTree’s Research on Mortgage Rates
As of the beginning of March 2019, the average 30-year fixed rate for a conforming loan was 4.84% on the national level. The study carried out by LendingTree found that the average mortgage rates actually vary for different states. Listed below are the highest and lowest mortgage rates by state:
States with the Highest Average Mortgage Rate
New York: 4.96%
Iowa: 4.93%
Arkansas: 4.92%
Oklahoma: 4.91%
Maine: 4.91%
States with the Lowest Average Mortgage Rate
California: 4.74%
New Jersey: 4.75%
Washington: 4.76%
Massachusetts: 4.76%
Utah: 4.77%
The most surprising of the results was that the state with the most affordable mortgage rates was California. The California real estate market is synonymous with luxury housing and expensive price tags. So to see the state come in at the bottom for mortgage rates was an interesting aspect of the study. In fact, even when other mortgage costs were taken into account (like points), the resulting calculation (known as the annual percentage rate or APR) for California was still low- 4.83%.
Other surprising results of the study are the states that came in with the highest mortgage rates. While we’re not referring to New York which is on the expensive side of the real estate spectrum, the states of Iowa, Arkansas, and Oklahoma are typically never lumped into the same group with New York when we discuss real estate market trends.
Related: Investment Property Mortgage Rates in 2019: All You Need to Know
Why the Difference in Mortgage Rates?
The Chief Economist at LendingTree said:
“The differences in the states are driven by local competition and business costs.”
Business costs can include judicial foreclosure which, while it makes the process of foreclosure more time-consuming and expensive, can result in lower interest rates as lenders are pickier about who they approve to begin with.
In addition to those, another factor that affects the difference in mortgage rates is who is applying for loans. For example, in some states where there’s more rigid regulation for loan qualification, only certain people bother applying. This naturally affects the average mortgage rates of the state.
Of course, your personal credit score still greatly affects the mortgage rate you can get for a loan, no matter what state you live in. So, it’s still important to review ways to improve your credit score before applying.
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