What is typically the primary factor affecting a borrower's mortgage interest rate?

The borrower’s credit score is typically the primary factor affecting a mortgage interest rate because it serves as a key indicator of the borrower’s creditworthiness and their ability to repay the loan. Lenders use credit scores to assess the risk involved in lending money. A higher credit score generally suggests that the borrower is more reliable and less likely to default on their loan, which allows lenders to offer lower interest rates. Conversely, a lower credit score indicates higher risk, leading to higher interest rates as lenders seek to compensate for that increased risk.

While the size of the mortgage, the location of the property, and the type of mortgage chosen can all influence the overall terms of a loan, they typically do not have as substantial an effect on the interest rate as a borrower’s credit score. The size of the mortgage may affect the loan-to-value ratio, which can influence the interest rate, but it is the credit history that fundamentally determines the perceived risk. Similarly, while property location can impact market value and desirability, it is still the borrower’s financial behavior as reflected in their credit score that has the most direct correlation with the rate offered. Lastly, the type of mortgage chosen (e.g., fixed vs. adjustable-rate) can affect the nature of the interest payments