Mortgage Rates Hit a 2025 Low— Here’s How to Get an Even Lower Mortgage Rate

Mortgage rates are finally cooling off. As of early August 2025, the average 30-year fixed rate has dipped below 6.75%, the lowest level we've seen all year. Headlines everywhere are announcing this drop like it’s a green light for buyers.

But here’s the truth: that “average” rate? It’s just a starting point. Most borrowers don’t get the average rate—they get one that’s higher or lower depending on their unique financial profile, the lender they choose, and how they structure their loan.

In fact, according to Bankrate, the top offers available right now are as low as 5.87%—nearly a full percentage point below the national average. That kind of difference isn’t just cosmetic. On a $400,000 loan, it could mean saving more than $3,500 every year.

So what actually determines your mortgage rate? And more importantly, how do you beat the average and get the best deal possible?

Let’s break it down.

Why the “Average” Mortgage Rate Doesn't Tell Your Whole Story

Before we go any further, here’s something every buyer needs to know:

Every week, industry surveys from Freddie Mac, Bankrate, Google, Optimal Blue, and others report the national average mortgage rate. These are helpful for understanding broad trends—but they don’t reflect the rate you’ll personally be offered. Most averages are based on a mixed pool of data that includes borrowers with different credit scores, down payments, property types, and lenders—ranging from retail banks to mortgage brokers, who often offer better rates.

Here's a breakdown of the typical sources and factors that influence the reported "average" mortgage rates:

• Mortgage News Daily (MND): Based on daily lender rate sheets, providing real-time updates.

• Freddie Mac: Weekly averages from surveys of lenders, typically for conforming loans with 20% down.

• Bankrate: Averages from a wide pool of U.S. lenders.

• Other Outlets (e.g., Zillow, NerdWallet, Fortune, US News): Use Optimal Blue data that's based on mortgage loans that are locked in their system from a wide variety of lenders or internal surveys.

These sources represent a mix of borrowers using brokers versus banks, with good and bad credit, low and high down payments, and varying levels of homebuyers (first time homebuyers vs investors)—all of which skew the reported averages, often making them appear higher than the best rates actually available to you. 

Big banks and direct lenders tend to have higher mortgage rates than brokers. Why? Because their operating costs are huge—think large buildings, big salaries, national advertising budgets, and bloated infrastructure. All that overhead gets priced into your loan.

Mortgage brokers, on the other hand, work with multiple wholesale lenders. They shop the market for you and compete on price. That means they can often deliver significantly lower rates for the exact same loan scenario.

According to BankRate the average on a conventional 30-year fixed mortgage right now is 6.74% but you could qualify for a rate that at least .25-5% lower IF you play your cards right when shopping for your mortgage. We always encourage buyers to sign up for rate alerts from lenders to make sure they are staying in the know on the best available rates.

The Two Buckets That Influence Mortgage Rates

Mortgage rates are determined by a mix of:

• Market-level factors (things outside your control)

• Borrower-level factors (things you can control)

Let’s start with the broader market.

Market Forces That Set the Stage

Your mortgage rate doesn’t come out of thin air. Behind the scenes, banks and investors are setting prices based on:

1. 10-Year Treasury Yields

The most important benchmark for mortgage rates is the yield on the 10-year U.S. Treasury note. Mortgage-backed securities (MBS), which are bundles of home loans sold on the secondary market, typically offer yields about 1.5–2% higher than Treasuries. When the yield on Treasuries drops, mortgage rates usually follow.

2. Inflation Expectations

High inflation eats away at the value of fixed returns, so investors demand higher yields—which pushes mortgage rates up. Lower inflation has the opposite effect. The Federal Reserve closely monitors inflation when deciding whether to raise or lower interest rates.

3. Federal Reserve Policy

The Fed doesn’t directly set mortgage rates, but its moves shape the entire interest rate landscape. When the Fed raises or cuts the federal funds rate, it influences borrowing costs across the economy—including mortgage rates. That said, mortgage rates often move independently based on how investors interpret the Fed’s future plans.

4. Global Events and Economic Growth

Geopolitical risk (like wars or elections) can send investors fleeing to “safe” assets like Treasuries, driving rates down. On the flip side, strong job growth or GDP reports can push rates up by signaling a healthy economy.

The Personal Factors That Actually Decide Your Rate

Here’s where things get interesting—and where you have more control than you think.

1. Credit Score

Your credit score is one of the biggest levers you can pull. Borrowers with scores above 780 get the lowest rates. Below 700, your options narrow—and below 640, you’ll likely pay a premium due to increased perceived risk and fewer available loan products. While the minimum credit score for a conventional loan is typically 620, many borrowers in the 620–699 range find that FHA loans offer better terms, especially if their credit is on the lower end. That doesn't mean you can't get a good deal relative to others in your bracket—especially if you follow the steps outlined here—but if your credit is below 700, your top priority should be increasing it before you start seriously home shopping.

Even a 20-point improvement could lower your rate by 0.25% or more.

2. Down Payment / Loan-to-Value Ratio (LTV)

The more equity you bring to the table, the less risk for the lender. A 20% down payment usually gets the best terms. If you’re putting down less than 20%, expect to pay mortgage insurance (PMI), which can increase your effective rate. The exception to this rule is first-time homebuyers or those who have been renting for the last three years and qualify for the HomeReady program. These borrowers may be eligible for competitive rates with low down payments—without taking a pricing hit.

3. Debt-to-Income Ratio (DTI)

Lenders want to make sure you can comfortably afford your payments. Most look for a DTI under 43%, but you’ll likely get better rates if you’re under 36%. A high DTI can raise red flags and force the lender to offer a higher rate to compensate.

4. Loan Size and Term length

Jumbo loans (those over conforming loan limits) often come with higher rates because they’re not backed by Fannie Mae or Freddie Mac.

Even choosing a 15-year loan instead of a 30-year can lower your rate by 0.5% or more, though the monthly payment will be higher. That’s because shorter-term loans carry less risk for lenders: they get their money back faster, face less long-term exposure to interest rate volatility, and see fewer defaults statistically. As a result, lenders are more willing to offer favorable pricing on these types of loans.

Adjustable-rate mortgages (ARMs) are another option worth considering—conventional ARMs often come with rates that are 0.375% to 0.5% lower than fixed-rate loans. You can learn more about ARMs here.

5. Property Type and Use

Primary residences generally get lower rates than vacation or rental homes. Lenders consider these properties less risky because borrowers are more likely to prioritize payments on a home they live in full time. In contrast, second homes and investment properties tend to carry higher rates, even when all other borrower qualifications are equal, because they're more likely to be abandoned or defaulted on during financial hardship.

If you're buying a condo, co-op, or manufactured home, expect additional pricing adjustments. These property types often come with shared maintenance responsibilities, unique ownership structures, or increased depreciation risk—factors that lenders bake into their rate models. Even warrantable condos (those that meet Fannie Mae and Freddie Mac guidelines) may still see a slight rate increase compared to single-family homes. Non-warrantable properties face even steeper pricing penalties and often require specialized loan programs.

6. Lender Type

Not all lenders price loans the same way. Big banks and direct lenders typically have higher mortgage rates due to large overhead costs, corporate profit structures, and internal risk models. Mortgage brokers, by contrast, work with multiple wholesale lenders and shop the market on your behalf. This competition often results in significantly better pricing—even if your borrower profile is identical.

The Mortgage Spread: What Lenders Don’t Advertise

This is where many borrowers get tripped up. You can do everything right—have a great credit score, low DTI, solid down payment—and still get a higher rate than someone with similar stats.

Even if two borrowers have identical profiles, they might still get different rates from different lenders. That’s because each lender has its own costs, margins, and appetite for risk. Some lenders might be swamped with applications and raise rates to slow demand. Others might lower rates to compete for market share.

Big banks and direct lenders often mark up rates to account for their higher operating costs—think infrastructure, salaries, and overhead. Mortgage brokers, on the other hand, access wholesale rates and compete for your business, often delivering lower pricing for the exact same loan scenario.

This difference is known as the primary-secondary spread—the markup lenders add to the base rate from the bond market. It includes things like:

• Origination costs

• Servicing fees

• Guaranty fees

• Profit margins

Shopping around is your best defense. According to a Freddie Mac study, getting just one additional quote can save borrowers an average of $1,200 per year. Can You Lower Your Rate? Yes—Here’s How

Let’s say you’re quoted 6.75% but want to get closer to that 5.99% number.

Here’s what you need to do to get a lower rate without footing the bill for discount points

Paying points is the obvious solution many lenders push you toward—but it shouldn’t be your first choice. And it definitely shouldn’t be the first one your lender or broker recommends. There are smarter, more sustainable ways to lower your rate without shelling out thousands upfront.

Here are some options:

Shop Multiple Lenders (Especially Mortgage Brokers)

This is the number 1 way to lower your rate without any major effort! Don’t settle for the first rate you see and don't settle for the first lender you speak with

. Compare offers from banks, credit unions, online lenders—and especially mortgage brokers, who can shop dozens of lenders on your behalf.

Improve Your Financial Profile

• Pay down credit card debt to improve your DTI

• Avoid taking on new loans before applying

• Correct any errors on your credit report

• Save aggressively to boost your down payment

• Understand your desired property and loan type

These steps don’t just help you qualify—they lower your rate, too.

Why Working With the Right Lender Really Matters

A lender who understands your full financial picture can match you with the right loan—and fight for better terms. Some lenders specialize in first-time buyers. Others focus on self-employed borrowers or jumbo loans.

At LendFriend Mortgage, for example, we’ve helped thousands of clients beat the national average by tailoring their loan strategy. Whether you're relocating to a new tech hub, buying with RSU income, or exploring crypto-backed financing, we structure mortgages around you—not around some outdated underwriting box.

Final Thoughts: Don't Settle for the Average

The national average mortgage rate might grab headlines—but it shouldn’t define your expectations.

Your personal mortgage rate is shaped by a dozen moving pieces: market dynamics, credit history, loan structure, property type, and the lender you choose. When you understand what’s driving those pieces, you gain leverage—and that leverage can save you tens of thousands over the life of your loan.

So if the average rate just hit a 2025 low? Good. But your rate can still be much better.

You just need to know how to ask for it.

Want to see what rate you actually qualify for?