If you’ve been shopping for a mortgage, you’ve probably noticed that rates vary wildly — not just between lenders, but based on your personal financial situation. A friend might get a 5.9% rate while you’re quoted 6.8% for the same loan amount. Why? And what can you do about it?

This guide explains what drives mortgage rates, what “good” actually means in practice, and how to put yourself in the strongest possible position before applying.

What drives mortgage rates?

Mortgage rates are determined by two layers of factors: the broader economy and your personal risk profile.

Economy-level factors

  • Central bank base rates. When the Federal Reserve (US) or Bank of England (UK) raises interest rates, mortgage rates typically follow.
  • Bond markets. Most mortgages are priced relative to government bond yields. When bond yields rise, mortgage rates rise.
  • Inflation. Higher inflation tends to push rates up because lenders need compensation for the falling purchasing power of future repayments.

Personal factors

  • Credit score. This is the biggest individual variable. A 760+ credit score typically unlocks the best rates. Dropping to 650 can add 1–2% to your rate.
  • Loan-to-Value (LTV) ratio. A lower LTV means less risk for the lender. Putting down 20% typically unlocks much better rates than a 5% deposit.
  • Debt-to-Income (DTI) ratio. Lenders want to see total monthly debts (including the new mortgage) below 36–43% of your gross income.
  • Employment history. Self-employed applicants often face stricter scrutiny and slightly higher rates.
  • Loan term. 15-year mortgages typically carry lower rates than 30-year ones.

What is a “good” mortgage rate right now?

Rates change constantly, so there’s no single number that’s permanently “good”. The right question is: am I getting a competitive rate for my credit profile and loan type?

A useful way to judge:

  • Look at the average 30-year fixed rate published by Freddie Mac (US) or the Bank of England (UK) for your market.
  • Compare your quoted rate to borrowers in your credit score bracket.
  • A rate within 0.25% of the best available for your profile is generally excellent.

Fixed vs. adjustable-rate mortgages

Fixed-rate mortgages lock in your interest rate for the entire loan term. Your monthly payment never changes. They’re predictable and safe, but you’ll pay a premium for that certainty.

Adjustable-rate mortgages (ARMs) start with a fixed rate for an introductory period (commonly 5, 7, or 10 years), then adjust periodically based on a market index. The initial rate is usually lower than a fixed-rate equivalent. The risk: if rates rise sharply during the adjustment period, your payment can jump significantly.

ARMs make sense if you’re confident you’ll sell or refinance before the initial fixed period ends.

How your credit score affects your rate

This table illustrates typical rate differences by credit score band (US market, approximate):

Credit scoreTypical 30-year rateMonthly payment (£300k loan)
760–8506.25%£1,848
720–7596.50%£1,896
680–7196.75%£1,945
640–6797.25%£2,046
600–6397.75%£2,150

The difference between a 760 and a 640 score: £198 per month and over £71,000 in extra interest over 30 years.

How to get the best possible mortgage rate

  1. Improve your credit score first. Even a 20-point improvement can move you into a better rate bracket. Pay down credit card balances, dispute any errors on your credit report, and avoid new credit applications 3–6 months before applying.

  2. Increase your down payment. Moving from 5% to 20% down removes PMI and dramatically improves your offered rate.

  3. Shop multiple lenders. Research consistently shows that getting 3–5 quotes saves the average borrower £2,000–£3,000 over the life of the loan.

  4. Consider paying points. Mortgage points let you pay upfront to permanently buy down your rate. Each point costs 1% of the loan and typically reduces the rate by 0.25%. Worth it if you plan to stay in the home long-term.

  5. Lock your rate at the right time. Once you’re in the application process, a rate lock protects you if rates rise before closing. 30–60 day locks are standard; longer locks cost more.

Calculate your affordability

Before applying, it’s worth knowing roughly how much house you can afford and what your monthly payments will look like. Use our free tools:

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