Mortgage rates just hit 7.28%. But there are ways to get a lower rate

Higher Mortgage Rates Raise Costs for Homebuyers, but Lower-Cost Paths Remain

Healfromzero.com – Homebuyers are confronting a sharp increase in borrowing costs after the average rate on a 30-year fixed mortgage climbed to 7.28% this week. Freddie Mac’s Thursday release showed the rate rising from 7.03% a week earlier, marking a sixth consecutive weekly increase and the largest one-week move in almost four years.

The latest reading puts mortgage rates at their highest point since November 2023. For people planning to buy a home, the increase can substantially affect affordability because even a modest rise in interest rates may add hundreds of dollars to a monthly payment, depending on the loan amount.

Rising Treasury yields have been a major force behind the change. The yield on the 10-year Treasury has moved higher in recent months as investors weigh the potential inflation effects of the Iran war and increased government spending. Concerns that inflation could remain persistent have also fueled expectations that the Federal Reserve may need to keep interest rates elevated for longer.

Higher rates may cool competition from buyers who are especially sensitive to financing costs. That can give determined purchasers more room to negotiate in some markets. Still, reduced competition does not erase the central challenge: financing a home purchase is now more expensive than it was only months ago.

Consider loan terms beyond the standard 30-year mortgage

The 30-year fixed-rate mortgage remains the most common choice because it spreads repayment over a long period, producing lower monthly principal-and-interest payments and a rate that does not change. That predictability is valuable, but it is not the only financing structure available.

A 15-year fixed mortgage often carries a lower interest rate than a 30-year loan. The trade-off is a considerably larger monthly payment because the balance must be repaid in half the time. For buyers with enough income to comfortably handle the payment, the shorter term can reduce total interest paid over the life of the loan.

Adjustable-rate mortgages, or ARMs, have also gained renewed attention. Mortgage Bankers Association data showed that ARM applications accounted for 10.3% of applications in the latest available week, their largest share since October 2025. Joel Kan, the association’s deputy chief economist, said ARM rates were running roughly 80 basis points below rates for fixed loans.

An ARM generally begins with a lower rate that stays fixed for a defined period, often five, seven or 10 years. Once that introductory period ends, the interest rate can reset in line with market conditions. That feature can make the loan attractive for someone who reasonably expects to sell the home or refinance before the adjustment date, but it also creates the possibility of a much higher payment if rates remain elevated.

“It may work well for some borrowers who are expecting to move or refinance in four or five years,” said Jeremy Luke, a divisional director at Chase Home Lending. “It may not work for all.”

The risks of adjustable loans deserve careful attention. ARMs were among the products associated with greater housing-market vulnerability before the 2008 financial crisis. Today’s borrowers should understand the initial rate, the adjustment schedule, payment caps and the maximum rate allowed under the loan before choosing one.

An assumable mortgage may offer another route

Some buyers may be able to take over the seller’s existing mortgage through an assumable loan. This can be particularly appealing when the seller obtained financing at a rate well below current market levels.

Not every mortgage is eligible. Many government-backed loans can be assumed, including loans insured by the Federal Housing Administration and loans backed by the Department of Veterans Affairs or the Department of Agriculture. The approval process can take longer than a conventional mortgage transaction, however.

There is also a significant cash consideration. An assuming buyer takes on the seller’s remaining mortgage balance, not the full purchase price. If the home has appreciated substantially or the seller has paid down much of the loan, the buyer may need a large down payment or separate financing to cover the difference.

Improve the offer a lender sees

Market rates set the broader backdrop, but an individual borrower’s rate is also shaped by personal financial factors. Jeff DerGurahian, head economist at loanDepot, pointed to credit scores, debt-to-income ratios and down payments as important parts of the lender’s evaluation.

Buyers can benefit from reviewing their credit reports, paying down debt when feasible and comparing offers from multiple lenders. A larger down payment may improve the terms available, though buyers should avoid committing so much cash that they lack funds for moving expenses, repairs, emergencies and regular household costs.

“You don’t want to put so much money down that you can’t do what you need to do to live in your house and live day-to-day,” DerGurahian said.

Paying discount points is another option. A permanent buydown reduces the interest rate for the entire mortgage term in exchange for more money at closing. A temporary buydown lowers the rate for only the initial years and may cost less upfront. The best choice depends on how long the buyer expects to keep the loan and whether the upfront expense produces meaningful savings over that period.

Negotiation can help offset financing pressure

Buyers should also examine the balance between supply and demand in their local market. When available homes outnumber active buyers, sellers may be more willing to offer concessions. A motivated seller could contribute toward closing costs or help fund a rate buydown as part of a negotiated deal.

Homebuilders have been using these incentives more frequently to attract buyers to newly built homes. In September, 66% of builders said they were using sales incentives, up from 63% in August and the highest share since December in the National Association of Home Builders’ sentiment survey. Mortgage rate buydowns and credits toward closing costs are among the tools builders may offer.

With rates above 7%, buyers face more difficult affordability decisions, but they are not limited to accepting the first 30-year fixed loan they see. Comparing loan structures, evaluating an assumable mortgage, strengthening finances, pricing buydown options and negotiating concessions can all make a meaningful difference. The key is weighing a lower initial rate against the cash required upfront and the potential risks that may emerge later.