When you see ads or the news, you might think that there's one average mortgage interest rate for the entire country. But nothing could be further from the truth. In fact, there are many types of mortgages, each with its own interest rate -- and mortgage rates vary from state to state.
All the different rates and variations make assessing mortgage interest rate trends tricky at best. To help you find the lowest mortgage rates, GOBankingRates researched average mortgage rates in every state and crunched the numbers. So, whether you live in Vermont or California, or want a five-year, adjustable-rate mortgage or 30-year, fixed-rate mortgage, you'll find the info you need to compare mortgage rates here. See if you live in one of the states that claim low interest rates.
Average U.S. Mortgage Rates
Mortgage Type
Interest Rate (% APR)
30-Year Fixed-Rate
3.70
15-Year Fixed-Rate
3.06
5-Year ARM
3.18
3-Year ARM
2.98
See: 10 Best States to Get a Mortgage Loan
Why Rates Vary From State to State
It might seem odd that U.S. bank mortgage rates vary from state to state. But it's not that surprising, according to Than Merrill, real estate expert and CEO/founder of real estate education site FortuneBuilders. One big reason for this is each state's varying laws and regulations, Merrill said.
"If for nothing else, both lenders and brokers are held to different standards in each state, which means the cost of doing business isn't universal," said Merrill. "In other words, it costs more to operate in some states, resulting in higher rates for lenders to offset their own expenditures."
Another factor is competition, he said. Each state has its own level of competition, based on many factors. Together with the laws and regulations, more competition can drive down rates.
10 Lowest Mortgage Rates by State
State
Average Interest Rate (% APR)
Vermont
2.93
Connecticut
2.94
Hawaii
2.94
Rhode Island
2.94
Mississippi
2.98
Alabama
3.01
Georgia
3.05
Washington, D.C.
3.06
Massachusetts
3.09
Maryland
3.09
Other Mortgage Rate Factors That Matter More
In case you're planning to move from a state with higher average mortgage rates to one with the best mortgage rates, you might not want to call the movers just yet. Merrill said that although the state in which you live matters, other factors matter more in the economics of scoring a low mortgage interest rate.
Merrill advised borrowers to worry less about where they live and more about factors such as credit score, income potential, debt, property value, and other things that lending institutions look at closely. "Those who focus on improving their credit score and existing financials can place the odds of receiving a better rate in their favor," Merrill said.
Mortgage Rates Are Historically Low
When you compare interest rates to years past, it's guaranteed to brighten your mood. And although the rates of the 1980s always give great sticker shock value -- the average 30-year-fixed-rate mortgage in October of 1981 was 18.45 percent, according to Freddie Mac -- you really don't have to go back that far.
According to Freddie Mac, the latest numbers -- from October 2016 -- show the monthly average rate on 30-year fixed-rate mortgages at 3.47 percent. "That's actually down from January of this year, and a far cry from where they were a decade ago when rates were as high as 6.36 percent at this time of the year," said Merrill.
Will Mortgage Rates Go Up?
The short answer is yes, almost definitely, said Merrill. Next year's, or even next month's, mortgage rates will almost certainly not be the same as mortgage interest rates today. "The economic recovery has gained enough traction for the Fed to remain confident in the nation's ability to withstand a modest increase," he said. It will likely only be a quarter of a percent.
But, more increases could be on the horizon if the economy continues to improve, said Merrill. "It's reasonable to assume interest rates will increase once again, and continue to do so as long as the economy proves it can support incremental, modest hikes," said Merrill.
Related: When to Choose an FHA Refinance Over a Conventional Mortgage
Is a Fixed-Rate or ARM Best for You?
An ARM, or adjustable rate mortgage, is one in which the interest rate is fixed for a set period of time -- say, one to five years -- and then changes to match current mortgage rates. For this reason, fixed-rate mortgages are recommended for anyone buying at a time when rates are already low and expected to rise," said Merrill. "Now would be the perfect example."
On the other hand, you might want to consider an ARM if mortgage rates are high and expected to drop. Or, importantly, if you believe you'll sell your home before the initial low rate will expire. If so, you could save a lot of money during those years, said Merrill.
10 Lowest 3-Year ARM Mortgage Rates by State
State
Average Interest Rate (% APR)
Alabama
2.00
Hawaii
2.21
Mississippi
2.23
Georgia
2.40
Connecticut
2.56
Rhode Island
2.59
Washington, D.C.
2.73
Texas
2.75
New Hampshire
2.79
Maryland
2.80
10 Lowest 5-Year ARM Mortgage Rates by State
State
Average Interest Rate (% APR)
Rhode Island
2.68
Hawaii
2.75
Vermont
2.75
Connecticut
2.82
Massachusetts
2.88
New Hampshire
2.89
Washington, D.C.
2.98
Mississippi
3.00
Colorado
3.03
North Carolina
3.03
30-Year or 15-Year Fixed Rate
If you do decide that a fixed-rate mortgage is best for you when buying a home or refinancing, you still have a few choices with regards to the term of your mortgage -- usually either 15 years or 30 years. Which term you choose does make a difference in your interest rate, but the amount you pay or save isn't quite that simple. That's because, although a 15-year term will, on average, have a lower interest rate, as the data shows, your monthly payment might be higher because you're paying off the principal faster.
However, said Merrill, because you're paying off the principal in half the time, you'll save a lot in interest. For instance, using Vermont's average -- the best rate in the country -- on a $175,000 mortgage, you'll pay $66,723 less in interest over the life of your loan using a 15-year fixed-rate as opposed to a 30-year fixed-rate mortgage.
10 Lowest 30-Year Fixed-Rate Mortgage Rates by State
State
Average Interest Rate (% APR)
Vermont
3.38
Hawaii
3.53
Connecticut
3.55
Rhode Island
3.55
Alaska
3.56
Massachusetts
3.57
Maryland
3.59
Kansas
3.60
Washington, D.C.
3.61
Georgia
3.62
10 Lowest 15-Year Fixed-Rate Mortgage Rates by State
State
Average Interest Rate (% APR)
Vermont
2.63
Alaska
2.81
Connecticut
2.81
Massachusetts
2.87
Washington, D.C.
2.90
Kansas
2.91
Georgia
2.92
Maryland
2.92
Rhode Island
2.93
Indiana
2.95
Hopefully, you reside in a state where interest rates are competitive. If not, at least you know you're not alone.
Up Next: How to Pay Off Your Mortgage Early
This article originally appeared on GOBankingRates.com: Average Mortgage Rates in the U.S.