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US States with the Highest and Lowest Mortage Interest Rates

The housing market in the United States is a patchwork of regional dynamics, with significant variations in mortgage rates, real-estate tax burdens, and median home values from state to state.

A new analysis by Flatworld Solutions shows that with an average of 7.55%, Texas offers the best mortgage rates, according to a recent analysis based on the data of the Consumer Financial Protection Bureau.

Four states offer rates that are under 7.7%. Texas leads with 7.55%, followed closely by Florida, Georgia, and North Carolina. Conversely, in 27 states, the current mortgage rate is currently at 7.875% to purchase a $417,700 house with a 10% down payment.

The disparity between the lowest and highest interest rates accumulates over 30 years. A homeowner in Texas will pay $30,000 less in interest compared to someone in New York or Oregon, two states with the highest mortgage rates.

State-Specific Rates

While national economic forces heavily influence mortgage rates, individual states can experience slight variations due to a mix of factors. Some states, like Texas and New Jersey, mortgage rates have been below national averages for over a decade. Competition among lenders is a key driver of lower rates.

States like Texas, with a potentially high number of lenders, may offer more competitive rates to attract borrowers. Additionally, Texas has consumer-friendly rules limiting the total mortgage debt on a home. This might make lenders more comfortable offering lower rates in the Lone Star State. This may explain why the rates in this state has been repeatedly below national average since 2009. Additionally, state-specific regulations can influence rates. Similarly, higher state taxes and title insurance costs in Florida could make refinancing less attractive, potentially keeping mortgage rates lower there.

Unfortunately, it is not possible to completely pinpoint the reasons behind each state's rates. While Georgia, North Carolina, and Kentucky currently offer better rates, historical data suggests their rates fall around the national average.

Since August 2023, the federal interest rate, which determines mortgage rates, has held steady at 5.5%. This rate may remain unchanged in the near future, with analysts expressing limited optimism regarding a short-term decrease.

Complexity of homeownership

Regional mortgage rates are not only impacting individual homeowners but also shapes broader economic trends and consumer behaviors in the housing market. As homebuyers weigh their options, understanding these regional disparities matters for making informed decisions and navigating the evolving landscape of homeownership.

The varying landscape of real-estate tax rates further underscores the complexity of homeownership affordability across the United States. States like Hawaii (0.27%), Alabama (0.39%), and Colorado (0.49%) have some of the lowest real-estate tax burdens. Conversely, Connecticut (2.00%), Illinois (2.11%), and New Jersey (2.33%) face higher tax rates, adding to the financial considerations for prospective buyers and homeowners. These disparities in tax burdens influences the cost of homeownership and the financial viability of property investments in different regions.

Finally, median home values varies drastically accross the country. Hawaii, the District of Columbia, and California lead the pack with higher-priced homes. In contrast, states like West Virginia, Mississippi, and Arkansas offer more affordable median home values, making. Understanding these variations in median home values is essential for prospective buyers to gauge affordability and make informed decisions in their homebuying journey.

These insights underscore the importance of considering multiple factors, including mortgage rates, real-estate tax rates, and home values, when assessing the housing market landscape.

Methodology

Mortgage rates were calculated using a Consumer Financial Protection Bureau (CFPB) tool, which reflects rates from various lenders and is updated regularly. Data was collected on April 30th, 2024. The analysis focused on a hypothetical $417,700 home purchase (US median price) with a 10% down payment and a 700-719 credit score, representing a typical homebuyer profile.