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The news last week that mortgage rates had recently fallen was certainly positive, but it was made more substantial considering that it was the fifth consecutive week in which rates on the product declined. Now at an average rate of 6.75% for a 30-year mortgage loan, no one would consider today’s rates a bargain, especially considering that they were hovering well under half that amount in June 2020, for example. At the same time, mortgage rates did surge to their highest point since 2000 just two summers ago, so any decline is both noticeable and welcome for homebuyers.
But will this trend continue into week six and beyond? Or was this recent five-week decline a reprieve ahead of the next inevitable surge? While predicting the future of interest rates is always difficult, if not impossible to do with precision, homebuyers may want to consider just doing that right now. Below, we’ll examine what needs (and doesn’t) need to happen for mortgage rates to continue falling this July.
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Will mortgage rates continue falling this July?
The recent mortgage rate decline came amid slightly waning concerns over economic policies, which caused stock market uncertainty earlier this year. But the decline also came as the Federal Reserve continued to keep its federal funds rate frozen. At a range between 4.25% and 4.50%, that rate hasn’t changed since December 2024, when the central bank cut it by 25 basis points. So while a pause there combined with a mortgage rate reduction may seem unusual, it’s not unprecedented. The Fed, after all, is only one component that impacts mortgage interest rates, with the 10-year Treasury yield also playing a major role in what lenders offer buyers (and owners looking to refinance).
So, what does this all mean for mortgage rates this July?
It’s hard to tell right now. The next inflation report reading, this time for June, is set for a July 15 release. Should that show inflation heading back down to the Fed’s target 2% goal (it rose from 2.3% to 2.4% in May), it could spark some small but noticeable changes in the mortgage rate climate. And even though a Fed rate cut looks highly unlikely for when the central bank meets again at the end of July (the CME Group’s FedWatch tool has a cut pegged at under 5%), comments made by Fed officials about the future of interest rates post-meeting could also impact the mortgage rate climate, perhaps encouraging another decline.
As the prospect of interest rate cuts grows, too, it’s also worth noting that lenders don’t need to wait for formal Fed rate-cutting action to reduce what they offer to borrowers. They can and likely will start adjusting their rate offers in advance. So be prepared to take advantage if they do with a good credit score and pre-approval letter in hand. And, as usual, monitor the interest rate climate for opportunities to act. Since many borrowers will prefer a fixed mortgage rate, it makes sense to watch the rate market each day for a limited opportunity to lock in a below-average rate when made available, a possibility that may arise sooner than expected this month.
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The bottom line
A recent decline in mortgage interest rates could be a sign of additional relief to come for buyers … or it may not be. It’s simply too early to tell if recent changes here are part of a trend or just an anomaly. If you think it’s part of the former, however, it may be time to start reviewing your credit report, boosting your score and taking other steps to improve your standing as a buyer. Lower mortgage rates, after all, will entice a whole new set of borrowers to the market. So you’ll want to be as prepared as possible to deal with that competition and, to lock in a low rate, if both present themselves in the weeks ahead.
