Economic Conditions

The current mortgage rate is actually an amalgamation of several rates. The mother of all interest rates, the Federal Funds Rate, is a single number and has nothing to do with whether mortgage is variable or fixed, or 15- or 30- years. But, all types of mortgage rates are derived from the Federal Funds Rate.

Some of the common mortgage index rates reflect an average of interest rates for conventional, 30 year fixed rate mortgages. However, even if you are looking for a variable rate mortgage, it’s useful to know this index, just to use as a guideline.

Some regional indices may include averages not only for 30-year fixed rate conventional mortgages, but averages for 15-year and 20-year fixed mortgages, jumbo mortgages, and variable rate mortgages as well.

All of these types of mortgages are based on the Federal Funds Rate, but all will vary. The introductory rate to a variable rate mortgage will always be the lowest. Interest rates will also vary depending on the term, with a 15-year mortgage being several basis points lower than a 30-year mortgage. Jumbo mortgages, because they are non-conforming and usually cannot be sold in the secondary market, carry a higher interest rate.

Nonprime mortgages are considerably higher, although they are still based on the Federal Funds Rate. There is no set index rate for nonprime mortgages, nonprime rates vary tremendously between lenders and depend on each borrower’s circumstances.

The mortgage rate you actually receive may not exactly mirror the current mortgage rate. Many other factors may also influence the mortgage rate you actually receive, including your creditworthiness, the region in which you are buying your home, and the amount of money you have to offer as a down payment.