How Texas Residents Are Managing Rising Loan Interest Rates

Interest rates are still high across the U.S., and that affects Texans in their daily lives, from mortgages to car payments to credit cards. To set the stage: the average 30-year fixed mortgage rate was 6.68% in the week ending August 21, 2025, according to Freddie Mac’s long-running Primary Mortgage Market Survey.

Credit cards are even tougher. The average APR across all credit card accounts was 21.16% in May 2025, based on the Federal Reserve’s G.19 data. Auto financing costs are elevated, too. The Fed’s latest terms-of-credit table shows 7.73% for a typical 72-month new-car loan in May 2025 (7.67% for a 60-month loan).

Households are carrying more of their income to debt payments than they were a year ago. The household debt service ratio was 11.25% of disposable income in the first quarter of 2025. With that backdrop, here’s how Texans are adapting, practical moves, local rules you should know, and programs many households are using right now.

Texas at a Glance: Why Rates Matter Here

Texas keeps adding people and jobs. The Texas Workforce Commission reports a statewide unemployment rate of 4.0% for June–July 2025, noting record-high labor force counts. A healthy job market helps borrowers, but higher rates still strain budgets.

Housing stress shows up in pockets. Property values and insurance costs have increased, and foreclosure starts have risen. Data provider ATTOM reported 3,600 foreclosure starts in Texas in July 2025, the highest number of any state that month. That doesn’t mean a crisis statewide, but it’s a warning to plan.

The good news is that Texas also has unique tools, strong homestead protections, an expanded $100,000 school-district homestead exemption, and strict home-equity loan rules that shape smart ways to handle borrowing when rates are high.

Mortgages

Here is how Texans are buying and refinancing anyway:

Rate shopping like it actually matters (because it does)

A one-point rate gap can result in a payment difference of hundreds of dollars. The CFPB’s Rate Explorer reminds borrowers to shop with several lenders and understand points and credits before locking in a rate. In a market where 30-year rates hover near the high 6s, the time spent comparing quotes often pays for itself quickly.

Using discount points and lender credits with a clear break-even point

Many Texas buyers shave the rate with discount points. Points are an upfront fee (typically 1% of the loan amount per point) paid to lower the interest rate; lender credits do the opposite—less cash at closing in exchange for a higher rate. The key is the break-even point: how long until monthly savings exceed the upfront cost? The CFPB stresses that points have no fixed effect on rates and only make sense if you’ll keep the loan long enough.

Some sellers fund temporary buydowns (like “2-1” buydowns) to ease the first two years of payments. The GSEs recognize temporary buydowns in loan data; ensure your Loan Estimate and Closing Disclosure clearly indicate who is funding it and how the rate steps up.

Mixing fixed and ARM options carefully

Adjustable-rate mortgages (ARMs) have made a comeback because their introductory rates can start lower than those of fixed-rate mortgages. In mid-August 2025, ARMs accounted for approximately 7% of applications nationwide, and refis comprised about 31% of the volume, signs that some borrowers remain rate-sensitive and tactical. Texan buyers who opt for ARMs are typically aiming to refinance before the first reset, or they’re matching the introductory period to the length of time they expect to keep the home.

Leaning on Texas down-payment help and tax credits

Two statewide programs show up again and again in real Texas deals:

TSAHC (Texas State Affordable Housing Corporation) offers down-payment assistance and a Mortgage Credit Certificate (MCC) that provides a tax credit worth 15% of the annual mortgage interest (subject to IRS rules). That reduces your tax bill each year, not your mortgage payment, freeing up cash for today’s rates.

TDHCA (Texas Department of Housing & Community Affairs) runs My First Texas Home, My Choice Texas Home, and a Texas MCC program. These offer fixed-rate loans with assistance and separate MCC options depending on income and purchase price limits. Check the current rate sheets, as terms and income limits are subject to change.

Using the homestead exemption and other tax rules to protect cash flow

In 2023, voters approved raising the school-district homestead exemption to $100,000, which lowers the taxable value for your primary residence and can trim your monthly escrow. If you haven’t filed for your exemption, do it; many Texans still leave this money on the table.

Seniors and certain disabled homeowners also have the option to defer property taxes on their homestead. That’s not for everyone, but in a cash crunch, it can keep money in the monthly budget. (Check with your county tax office or the Comptroller’s guidance before you decide.)

Choosing the right way to tap home equity—Texas rules are different.

Texas’s constitution limits total home-equity borrowing on a homestead to 80% loan-to-value. That cap protects many homeowners from over-leveraging at high rates. If you need cash, consider comparing a cash-out refinance to a HELOC. With rates high, many Texans prefer HELOCs for smaller, staged projects because you only borrow what you actually use. Either way, the 80% cap still applies statewide.

When a refinance still makes sense.

Refis sound odd when current rates exceed your existing coupon. But they can still help if you’re:

Consolidating high-APR debt (like credit cards at ~21% APR) into a lower fixed rate,
Removing a variable-rate second lien, or
Switching from an ARM near its first reset into a fixed loan.

Run the numbers against your actual horizon and closing costs to ensure accuracy. If you expect to move soon, smaller steps (principal prepayments, a HELOC for flexibility) may be more effective than a full refinance.

Auto Loans

Check how Texans are keeping the car, and cutting the cost:

Smaller term, lower risk

With 72-month new-car loans averaging ~7.7% in May 2025, long terms can bury you in total interest and raise negative-equity risk. Texans who can afford to stretch their payments or down payment are choosing 60 months (or less) to reduce interest paid. Even a small APR break, combined with a shorter term, can save thousands.

Buy the car, not the rate—shop lenders before the lot

Get preapproved through your bank or a credit union before visiting a dealership. Dealers can mark up a lender’s buy rate. A clean preapproval gives you leverage and a clear understanding of your borrowing capacity. Many buyers also monitor the Manheim Used Vehicle Value Index to time their purchases; when wholesale prices dip, retail deals typically follow with a lag.

Refinance when you can

If your credit score has improved, or you bought at a worse rate during a shortage window, a refi can bring the APR down. There’s no universal rule here—run total-cost math, including any lender fees. If cutting the rate allows you to shorten the term without increasing the payment, that’s ideal.

Avoid add-ons you don’t need

GAP and extended warranties can be useful, but they’re often priced high at closing. If you want them, price them outside the dealership. Keeping the loan principal lower is one of the simplest ways to fight high APRs.

Credit Cards

Here is how to tackle the highest rates first:

Know the number you’re fighting.

The Fed reports an average APR of 21.16% across all card accounts as of May 2025. Some borrowers pay more. High APRs compound quickly and can quickly overwhelm a budget, especially if you only make minimum payments.

Use balance-transfer windows wisely.

A good 0% intro transfer can be a bridge—not a new habit. Adjust your balance, pay a fixed amount each month, and plan to complete it before the introductory period ends. Watch transfer fees, and don’t add new charges to the transfer card. (The Fed and CFPB both emphasize the power of shopping terms here.)

Ask your issuer for a hardship rate.

Card issuers offer hardship programs that can temporarily lower rates or payments if you encounter a financial hardship. They’re not automatic; you have to call and ask. The CFPB’s guidance explains how these arrangements work and what to request, including how they’ll be reported to credit bureaus. If you qualify, the interest savings can be real.

Consider a Debt Management Plan (DMP)

Nonprofit counseling agencies (often NFCC-affiliated) can set up a single monthly payment, reduce interest with your creditors, and provide a 36–60 month payoff plan. DMPs aren’t loans, and you keep paying your accounts, just at lower negotiated rates. If you’re juggling multiple cards, it’s worth a free intake call.

Use a simple payoff method and automate it

Avalanche: Pay the highest APR first for fastest interest savings.
Snowball: Cover the smallest balance first for quicker wins.

Pick one, automate your payments, and keep new charges off the card you’re paying down. Consistent progress beats perfect math if it keeps you on track.

Student Loans: Limiting Interest Creep

Federal student loan rules are constantly changing, but one consistent option remains the SAVE income-driven plan. SAVE’s interest benefit can prevent unpaid interest from adding to your balance when your required payment is too low to cover the month’s interest (limits apply and some grace provisions expire after August 1, 2025). That helps Texans keep balances from ballooning while rates are high elsewhere in their finances. Always confirm current terms on the official site before switching plans.

Small Businesses: Borrowing Smarter When Prime Is High

Many Texas small businesses rely on SBA-backed loans for working capital or to purchase real estate. Even when prime is elevated, SBA rules cap how much spread a lender can charge:

For 7(a) loans of $50,000–$250,000 with variable rates, the max is prime + 6.5 percentage points.
For loans over $250,000, the max is prime + 3.0 (variable) or prime + 5.0 (fixed).
Microloans follow separate rules.

These caps can keep rates closer to earth than some conventional options. If you already have a variable-rate SBA loan, ask your lender about re-amortization or refinancing inside the program as your finances improve.

Protecting Your Budget and Credit Profile

Do it through these steps:

Guard your debt-to-income (DTI)

With high rates, every extra dollar of monthly debt costs more. If you’re near a mortgage or refi, hold the line on new car notes or furniture financing. Lenders look closely at DTI, and keeping it lower can unlock better rates.

Keep utilization low

Maintaining credit card utilization below 30% of the limit (ideally under 10%) helps improve your score and provides room for unexpected expenses. Consider making a mid-cycle payment before the statement is cut to report a lower balance.

Build a cash buffer, even if slowly.

Set a goal of one month’s expenses as your first target. Parking that in a high-yield savings account gives you flexibility so you don’t swipe a 21% APR card for car repairs or co-pays.

Watch for property tax and insurance surprises.

In Texas, escrow can jump after an appraisal or policy renewal. If you anticipate a significant increase, contact your servicer early and inquire about spreading out escrow shortages to avoid a shock payment. Pair this with your homestead exemption to minimize the hit.

What to Do If You’re Struggling with Payments

Here is what to do depending on the loan:

Mortgages

Call your servicer at the first sign of trouble. Options include repayment plans, deferrals, or a loss-mitigation review. If your hardship is longer-term, consider asking about loan modification scenarios and whether your investor (Fannie/Freddie Mac, FHA/VA/USDA) offers special programs. Keep records of every call.

Auto loans

If a gap is temporary, ask about due-date changes or payment extensions. If it’s structural (job change, divorce, medical), a refi to a lower rate and term you can handle may beat a string of late fees. Don’t ignore certified letters; act before repossession fees pile up.

Credit cards

Request a hardship program in writing and ask how it affects your credit reporting. If you’re already 60+ days late across cards, talk to a nonprofit credit counselor about a DMP the same week. The earlier you start, the better your outcomes will be.

What Texans Are Watching Next

Texans are closely monitoring key indicators that impact their budgets, including mortgage rates and property taxes. Knowing where to look for updates helps families and businesses plan ahead, rather than getting caught off guard.

Mortgage rates: Freddie Mac’s PMMS remains the quick weekly pulse. A drop of even half a percentage point can significantly impact affordability in Texas metros like Houston and DFW.
Credit card APRs and auto rates: The Fed’s G.19 terms-of-credit table is the clean source for average card APRs and bank auto rates. Watch monthly updates.
Debt service ratio: If the DSR keeps edging up, households have less cushion against shocks. That’s your cue to build cash and trim payments where possible.
Property tax rules: Texas lawmakers and voters periodically adjust property tax relief. The Comptroller posts official guidance; check there before the appraisal or tax bills hit.

Bottom Line

Rates are still high, but Texans have levers to pull. Shop hard. Use points and buydowns only when the math works in your favor. Protect your budget with the homestead exemption and by keeping other debts lean. Pick the right tool for tapping equity under Texas’s 80% cap. Keep card APRs from snowballing with transfers, hardship programs, or a DMP. For businesses, let the SBA rate caps work in your favor.

None of this is magic. It’s a concise list of steps, verified against real numbers, and repeated over time. That’s how households across Texas are staying on track until rates truly fall.