To calculate mortgage interest rates in the United States, lenders analyze multiple factors including loan amount, borrower creditworthiness, loan term, and market conditions. Fixed-rate mortgages use a formula combining the principal, monthly interest rate, and loan duration to determine monthly payments. However, the interest rate itself is set by lenders based on risk assessment and market benchmarks. For example, the 30-year fixed-rate mortgage rate is typically derived from the 10-year Treasury yield plus a lender-specific risk premium. Borrowers with higher credit scores or larger down payments generally secure lower rates. Adjustable-rate mortgages (ARMs) start with a lower rate tied to a benchmark like the SOFR index, which adjusts periodically.

The calculation of mortgage interest rates is influenced by macroeconomic trends and individual borrower risk. According to the Federal Housing Finance Agency (FHFA), the average 30-year fixed-rate mortgage stood at 7.14% in September 2023, up from 6.74% in March 2023, reflecting rising Treasury yields amid Federal Reserve rate hikes. Lenders assess creditworthiness using the FICO score; borrowers with scores below 620 may face rates 1-2 percentage points higher than those with scores above 780. For instance, a $300,000 loan with a 20% down payment and a 620 FICO score might carry a 7.5% rate, while a 780 score could secure 6.25%. Down payment size also impacts rates—FHA loans require only 3.5% down but add 0.5-1.0% in insurance costs. Market competition and regulatory changes further influence pricing, as seen in 2022 when rates dropped from 5.3% to 4.1% due to Fed policy shifts. These dynamics ensure rates balance lender profitability with borrower affordability while reflecting broader economic conditions.