States with Lowest Mortgage Rates as of July 9, 2025
Mortgage rates across different U.S. states vary significantly, and understanding the reasons behind this variation is essential for homebuyers. The primary factors influencing these differences are state-level economic conditions, real estate market characteristics, lender competition, and broader national economic factors.
States with strong economies, stable real estate markets, and high demand for housing tend to have more competitive mortgage rates. Conversely, states with economic challenges, smaller or sparse housing markets, and less real estate activity often experience higher rates. For example, states like Alaska, West Virginia, Vermont, Wyoming, North Dakota, Mississippi, Delaware, and Nebraska have higher mortgage rates due to smaller or less competitive markets and unique economic conditions tied to natural resources or rural settings.
Lending competition also plays a crucial role in determining mortgage rates. In states where there are more lenders competing for business, rates are typically lower. Limited competition in less populated or more rural states can push rates higher.
The overall U.S. economy significantly impacts mortgage rates. Inflation concerns, federal government debt levels, and actions by the Federal Reserve influence borrowing costs nationwide. The Fed's decisions on the federal funds rate and management of its balance sheet (such as buying or selling mortgage-backed securities) directly impact mortgage interest rates, although not in a perfectly fixed manner.
Demand for home loans also plays a role in setting mortgage rates. High demand can lead lenders to raise rates to manage volume and protect profits, while low demand may encourage lenders to lower rates to attract borrowers.
Mortgage rates tend to track the bond market, particularly the 10-year Treasury yield, which reflects investors' expectations about future interest rates and economic conditions.
The Fed's recent June 2025 meeting reaffirmed plans for two rate cuts in 2025, but policymakers are divided on timing and magnitude. As of July 9, 2025, the average 30-year fixed-rate mortgage stands at 6.87%. Analysts project that rates may decline to 5% by 2028 if the Fed follows through on cuts.
Shopping around for mortgage rates is crucial. It's recommended to get quotes from at least three to five lenders and consider working with a mortgage broker or local credit union. Lender risk management, teaser rates, state-level regulations, and variations in credit scores among states can also influence mortgage rates.
As of July 9, 2025, the states offering the lowest 30-year new purchase mortgage rates are New York, California, Georgia, Texas, Washington, Indiana, New Jersey, and Colorado, with rate averages between 6.69% and 6.85%. Conversely, the states with the highest rates are Alaska, West Virginia, Vermont, Wyoming, North Dakota, Mississippi, Delaware, and Nebraska, with averages between 6.93% and 7.05%.
In summary, the variation in mortgage rates by state results from local economic realities—such as market size, real estate dynamics, and lender competition—combined with the prevailing national economic environment and monetary policy influences. This mix explains why states with smaller, more rural, or resource-dependent economies often face higher mortgage rates, while states with strong economies and competitive lending environments enjoy lower rates.
- For homebuyers, it is vital to comprehend the factors influencing mortgage rates across different U.S. states, particularly economic conditions, real estate market characteristics, lender competition, and national economic factors.
- States with strong economies, stable real estate markets, and high demand for housing tend to have more competitive mortgage rates, unlike states with economic difficulties, smaller or less active housing markets, and higher rates.
- Lending competition is a significant factor in determining mortgage rates, with lower rates in states where there is more competition among lenders. Conversely, limited competition in less populated or rural states can drive rates higher.
- The overall U.S. economy significantly impacts mortgage rates, with factors such as inflation concerns, federal government debt levels, and the Federal Reserve's decisions on the federal funds rate and its balance sheet affecting borrowing costs nationwide.
- The demand for home loans also plays a role in setting mortgage rates, with high demand potentially leading to higher rates to manage volume and protect profits, while low demand may encourage lenders to lower rates to attract borrowers.
- Mortgage rates often follow the bond market, particularly the 10-year Treasury yield, as it reflects investors' expectations about future interest rates and economic conditions.
