Cities where buyers get the best interest rates

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After a long period of intense competition and high prices in the residential real estate market, 2022 brings signs that the market may soon begin to cool down. With inflation on the rise and house prices still rising, more and more buyers are finding themselves unable to afford the cost of real estate. And with the US Federal Reserve poised to raise interest rates throughout 2022, the cost of mortgages could rise further and deter potential buyers.

The Fed’s March 2022 decision raising rates and signaling further increases in the near future could signal the end of a long period of historically low interest rates dating back to the Great Recession. In the years following the recession, the Federal Reserve kept interest rates low to encourage economic activity. Low borrowing costs from the Fed have made it less expensive for commercial banks to access credit and provide loans to customers. During the COVID-19 pandemic, rates fell again as large parts of the economy experienced disruption from the spread of the virus. But with inflation soaring through 2021 and into 2022, the Fed is now looking to raise rates to stem borrowing and slow the economy, and mortgage lenders will follow suit.

For homebuyers, this means that mortgage interest rates have already started to rise and will likely continue to rise in the months ahead. Average interest rates for 15-year fixed-rate mortgages and 30-year fixed-rate mortgages have increased by more than one percentage point since the start of 2022. After remaining at 2.5% or less throughout 2021, the 15-year rate fell to 3.8% at the end of March 2022, while the 30-year rate oscillated between 2.7% and 3.2% in 2021 before rising to 4 .7%. After a period of historically low rates, continued increases could push rates to their highest levels since 2018 and possibly back to pre-recession levels.

Economic trends and Fed actions will be a major factor in determining what rates banks offer, but potential buyers can manage their interest rates and keep property close at hand in other ways. Great credit and a large down payment will generally translate to lower rates, and borrowers can evaluate options like shorter mortgage terms, adjustable rate mortgages, or unconventional loan types that may provide viable alternatives.

Another important factor in mortgage interest rates is geography. Rates vary from place to place due to differences in economic characteristics, laws governing lenders and real estate market conditions. Typically, real estate markets served by fewer lenders often have higher rates because there is less competition to drive rates down. Lenders in areas where more borrowers have low incomes or bad credit will also be less likely to offer low rates.

While the median interest rate for all fixed-rate mortgages in 2020 was 3.15%, more than a third of all buyers got rates below 3.0%. Among states, Mississippi and New Mexico have the lowest share of mortgages with rates below the 3.0% threshold at 25.6%, while nearly half of borrowers (47.2% ) scored below 3.0% in US-leading South Dakota. At the metropolitan level, some of America’s most expensive markets, including the Bay Area and Boston, most often offer low interest rates. Homebuyers in these locations tend to have higher incomes and more money to spend on a down payment, which helps control their rates.

The data used in this analysis comes from the Federal Financial Institutions Examination Council Residential Mortgage Disclosure Act. Only conventional home loans approved in 2020 with a fixed interest rate were considered in this analysis. To determine where buyers are getting the best interest rates, researchers from Construction site coverage calculated the share of all fixed rate mortgages, including 15 and 30 year mortgages, that were below an interest rate of 3.0%. The researchers also included statistics for 15- and 30-year fixed-rate mortgages, as well as the median interest rate of all fixed-rate mortgages.

Here are the US metropolitan areas where buyers are getting the best interest rates.

Great metros where buyers get the best interest rates

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15. Raleigh-Cary, North Carolina

  • Share of fixed rate mortgages with rates 39.2%
  • Share of 30-year mortgages with a rate 38.0%
  • Share of 15-year mortgages with a rate 67.2%
  • Median interest rate for all fixed rate mortgages: 3.13%

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14. Los Angeles-Long Beach-Anaheim, CA

  • Share of fixed rate mortgages with rates 39.2%
  • Share of 30-year mortgages with a rate 39.2%
  • Share of 15-year mortgages with a rate 66.3%
  • Median interest rate for all fixed rate mortgages: 3.13%

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13. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

  • Share of fixed rate mortgages with rates 39.3%
  • Share of 30-year mortgages with a rate 38.4%
  • Share of 15-year mortgages with a rate 62.5%
  • Median interest rate for all fixed rate mortgages: 3.13%

Photo credit: Sean Pavone/Shutterstock

12. Pittsburgh, Pennsylvania

  • Share of fixed rate mortgages with rates 39.6%
  • Share of 30-year mortgages with a rate 37.9%
  • Share of 15-year mortgages with a rate 66.3%
  • Median interest rate for all fixed rate mortgages: 3.13%

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11. Portland-Vancouver-Hillsboro, OR-WA

  • Share of fixed rate mortgages with rates 39.7%
  • Share of 30-year mortgages with a rate 39.3%
  • Share of 15-year mortgages with a rate 69.9%
  • Median interest rate for all fixed rate mortgages: 3.13%

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10. Riverside-San Bernardino-Ontario, California

  • Share of fixed rate mortgages with rates 39.7%
  • Share of 30-year mortgages with a rate 39.8%
  • Share of 15-year mortgages with a rate 63.2%
  • Median interest rate for all fixed rate mortgages: 3.13%

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9. Seattle-Tacoma-Bellevue, WA

  • Share of fixed rate mortgages with rates 40.4%
  • Share of 30-year mortgages with a rate 40.2%
  • Share of 15-year mortgages with a rate 71.5%
  • Median interest rate for all fixed rate mortgages: 3.13%

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8. Austin-Round Rock-Georgetown, TX

  • Share of fixed rate mortgages with rates 40.4%
  • Share of 30-year mortgages with a rate 40.9%
  • Share of 15-year mortgages with a rate 53.7%
  • Median interest rate for all fixed rate mortgages: 3.13%

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7. San Diego-Chula Vista-Carlsbad, CA

  • Share of fixed rate mortgages with rates 41.2%
  • Share of 30-year mortgages with a rate 41.1%
  • Share of 15-year mortgages with a rate 73.1%
  • Median interest rate for all fixed rate mortgages: 3.13%

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6. New York-Newark-Jersey City, NY-NJ-PA

  • Share of fixed rate mortgages with rates 41.4%
  • Share of 30-year mortgages with a rate 40.6%
  • Share of 15-year mortgages with a rate 61.2%
  • Median interest rate for all fixed rate mortgages: 3.13%

Photo credit: Sean Pavone/Shutterstock

5. Washington-Arlington-Alexandria, DC-VA-MD-WV

  • Share of fixed rate mortgages with rates 42.2%
  • Share of 30-year mortgages with a rate 41.2%
  • Share of 15-year mortgages with a rate 74.7%
  • Median interest rate for all fixed rate mortgages: 3.13%

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4. Sacramento-Roseville-Folsom, CA

  • Share of fixed rate mortgages with rates 42.2%
  • Share of 30-year mortgages with a rate 41.8%
  • Share of 15-year mortgages with a rate 73.8%
  • Median interest rate for all fixed rate mortgages: 3.13%

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3. San Jose-Sunnyvale-Santa Clara, CA

  • Share of fixed rate mortgages with rates 42.2%
  • Share of 30-year mortgages with a rate 42.6%
  • Share of 15-year mortgages with a rate 75.0%
  • Median interest rate for all fixed rate mortgages: 3.00%

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2. San Francisco-Oakland-Berkeley, CA

  • Share of fixed rate mortgages with rates 43.6%
  • Share of 30-year mortgages with a rate 43.5%
  • Share of 15-year mortgages with a rate 72.7%
  • Median interest rate for all fixed rate mortgages: 3.00%

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1. Boston-Cambridge-Newton, MA-NH

  • Share of fixed rate mortgages with rates 43.7%
  • Share of 30-year mortgages with a rate 42.4%
  • Share of 15-year mortgages with a rate 78.2%
  • Median interest rate for all fixed rate mortgages: 3.00%

Detailed results and methodology

The data used in this analysis comes from the Federal Financial Institutions Examination Council Residential Mortgage Disclosure Act. Only conventional home loans approved in 2020 with a fixed interest rate were considered in this analysis. To determine where buyers are getting the best interest rates, the researchers calculated the share of all fixed-rate mortgages, including 15- and 30-year mortgages, that were below an interest rate of 3, 0%. In the event of a tie, locations with a higher share of 30-year mortgages below 3.0% interest rate were ranked higher. To improve relevance, only metropolitan areas with at least 100,000 inhabitants were included. Additionally, metros were grouped into cohorts based on population size: small (100,000 to 349,999), medium (350,000 to 999,999), and large (1,000,000 or more).

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