A mortgage rate is the interest rate on a home loan. It helps decide how much a borrower pays each month and how much interest builds up over the years. Small differences in the rate can add up to tens or even hundreds of thousands of dollars, according to the Consumer Financial Protection Bureau (CFPB).

Fixed and adjustable rates

The CFPB says a fixed-rate mortgage has an interest rate that is set when the loan is taken out and does not change. An adjustable-rate mortgage, often called an ARM, has an interest rate that may go up or down.

Many ARMs start at a lower rate than fixed-rate mortgages, the CFPB says. That starting rate may hold for a few months, a year or a few years. When the introductory period ends, the rate changes at regular intervals, and the payment is likely to go up.

How an adjustable rate is set

Part of an adjustable rate is tied to an index, which is a broader measure of interest rates. When the index rises, the payment goes up. When rates fall, the payment sometimes goes down, but the CFPB says this is not true for all ARMs.

At each change, the new rate is the current index plus the lender’s margin, kept within any caps. The margin is the extra percentage points the lender adds to the index. A cap is a limit on how far the rate can move. Some ARMs cap how high the rate can rise at any one time or over the life of the loan, and some also limit how far it can fall. The caps can differ for the first change and for later regular changes.

The CFPB lists questions to ask about any ARM. They include how high or low the rate and payment can go with each adjustment, how often the rate adjusts, and how soon the payment could rise. They also include whether the loan would still be affordable if the rate and payment reached the maximums in the contract.

What shapes the rate a lender offers

The CFPB’s rate tool shows how four factors change offers: credit score, down payment, loan term and loan type. Its examples assume a single-family house priced at $400,000 that will be a primary residence. Unless stated otherwise, they also assume a 10% down payment, a 700 credit score and a conventional 30-year fixed-rate loan. The rates come from lender data dated April 1, 2025, supplied by the company Curinos, which collects the data directly from lenders. The lenders include large banks, regional banks and credit unions. The CFPB notes that Curinos cannot guarantee the data is accurate.

Credit score is the first factor. In the examples, offers for a 625 score ranged from 6.125% to 8.875%, and offers for a 700 score ranged from 5.875% to 8.125%. The CFPB says a higher score generally brings lower rates and more lenders to choose from. Comparing the highest-cost 625 example with the lowest-cost 700 example, it shows a gap of up to $264,523 over 30 years.

Down payment is the second factor. A 10% down payment means a $360,000 loan, and a 25% down payment means a $300,000 loan. The CFPB says a larger down payment typically lowers the rate and also shrinks the loan. In its examples, the lowest-cost 25% down case pays $330,259 in interest over 30 years, compared with $602,276 for the highest-cost 10% down case.

Loan term and loan type

Loan term is how long the borrower has to repay. In the examples, 15-year fixed offers ranged from 5.000% to 7.500%, compared with 5.875% to 8.125% for 30-year loans. The CFPB says shorter terms generally carry lower rates because the lender takes on less risk.

A shorter term also means a higher monthly payment. Less of each payment goes to interest and more goes to building equity, the CFPB says. In its examples, the lowest-cost 15-year loan carries $152,434 in total interest, compared with $602,276 for the highest-cost 30-year loan.

Loan type matters too. Loans backed by the Department of Veterans Affairs (VA), the Department of Agriculture (USDA) or the Federal Housing Administration (FHA) can offer lower rates for borrowers who qualify, the CFPB says. VA loans generally go to U.S. military veterans, servicemembers or surviving spouses. FHA loans can cost less than conventional loans for borrowers with lower credit scores and down payments under 10% to 15%. In the examples, VA or FHA offers ranged from 5.375% to 7.875%.

The rate is not the whole cost

The CFPB says the interest rate matters, but a mortgage carries other costs too. Fees, points, mortgage insurance and closing costs each add to the total. It says comparing Loan Estimates from different lenders is the way to compare total offers.

For a sense of average rates on 30-year and 15-year mortgages, the CFPB points to Freddie Mac, a government-sponsored corporation that supports the mortgage business. The bureau says these averages give an idea of the rates a borrower might be offered while shopping around.