Last year, most financial experts — really, anyone who kept up with Fed moves — were certain that interest rates would finally begin to rise in 2014. Now, eight months into the year, mortgage rates are still at record lows and — surprisingly — consumers aren’t even taking advantage of them.
Mortgage originations have declined every quarter since 2012; but if interest rates only have one direction to go from here, why aren’t more potential home buyers jumping at the chance to lock into low rates for decades?
There are many reasons locking into a low mortgage rate now is crucial. When it comes to 15- or 30-year mortgages, a 10th of a percentile can make a huge difference in terms of costs over the life of a loan, as well as month over month. And when rates do go up — which they will, sooner or later — home buyers will be looking at hikes of more than just a few basis points.
According to Freddie Mac, average mortgage rates reached a high of 16.63 percent in 1981, eventually dipping to pre-recession rates of 6.41 percent in 2006. At that percentage, total interest paid over the life of a loan (at the current median home price of $215,000) would amount to $215,718, with monthly payments of $1,301. Compare that to the 2013 average of 3.98 percent: Total interest would be almost halved, at $122,902, and the monthly payments would be more than $250 cheaper.
10 Least Expensive States for Mortgage Rates
| Rank | State | Average Mortgage Rate |
| No. 1 | Rhode Island | 3.395 percent |
| No. 2 | Connecticut | 3.413 percent |
| No. 3 | Nevada | 3.459 percent |
| No. 4 | Pennsylvania | 3.551 percent |
| No. 5 | Maryland | 3.593 percent |
| No. 6 | Massachusetts | 3.597 percent |
| No. 7 | Mississippi | 3.599 percent |
| No. 8 | Hawaii | 3.603 percent |
| No. 9 | Minnesota | 3.623 percent |
| No. 10 | New Hampshire | 3.649 percent |
10 Most Expensive States for Mortgage Rates
| Rank | State | Average Mortgage Rate |
| No. 1 | Nebraska | 4.102 percent |
| No. 2 | South Dakota | 4.066 percent |
| No. 3 | Wyoming | 4.059 percent |
| No. 4 | Vermont | 4.020 percent |
| No. 5 | Oklahoma | 4.019 percent |
| No. 6 | Arizona | 3.954 percent |
| No. 7 | Montana | 3.938 percent |
| No. 8 | Indiana | 3.858 percent |
| No. 9 | West Virginia | 3.854 percent |
| No. 10 | Iowa | 3.853 percent |
What Affects Regional Mortgage Rates
Several factors work in tandem to drive mortgage rate changes. On the national level, the prime rate, LIBOR, bond yields, inflation and mortgage-backed securities all affect interest rates. Regionally, factors like borrower demand, local property values, default rates, loan concentration and unemployment can play a part in mortgage rate variation, as well.
