The average U.S. mortgage rate has fallen to its lowest level since early April, providing a glimmer of hope for prospective homebuyers navigating a challenging market. According to Freddie Mac, the 30-year fixed-rate mortgage declined to 6.67% for the week ending July 3, down from 6.77% the previous week. This marks the fifth consecutive week of declines and the most significant drop since early March.
The 15-year fixed-rate mortgage also saw a decrease, falling to 5.80% from 5.89% the prior week. These reductions are a welcome development for buyers who have been contending with elevated borrowing costs and limited housing inventory.
“Declining mortgage rates are encouraging and, while overall affordability challenges remain, more sellers are entering the market, giving prospective buyers an advantage,” said Sam Khater, Freddie Mac’s chief economist.
Mortgage rates are influenced by various factors, including the Federal Reserve’s interest rate policies and movements in the bond market. The recent decline in rates aligns with a drop in the 10-year Treasury yield, which lenders often use as a benchmark for setting mortgage rates. As of midday July 3, the 10-year Treasury yield stood at 4.33%, down from 4.58% just a few weeks prior.
However, the broader economic landscape presents mixed signals. A robust June jobs report, with employers adding 147,000 jobs and the unemployment rate dipping to 4.1%, has tempered expectations of an imminent Federal Reserve rate cut. The strong labor market suggests the Fed may maintain current interest rates in the near term, especially with inflation still above its 2% target.
The decline in mortgage rates has spurred a modest uptick in housing market activity. Pending home sales rose 1.8% in May from the previous month, indicating potential improvements in upcoming sales. Additionally, mortgage applications increased by 2.7% last week, reflecting growing buyer interest.
Despite these positive signs, affordability remains a significant hurdle. High home prices, coupled with elevated mortgage rates, have kept many potential buyers on the sidelines. Last year, sales of previously occupied U.S. homes fell to their lowest level in nearly 30 years, and the market has remained sluggish in 2025. However, the recent rate declines may provide some relief, potentially encouraging more buyers to enter the market.
Economists anticipate that mortgage rates will remain relatively stable in the coming months, fluctuating between 6% and 7%. While the recent declines are promising, the path forward will largely depend on economic indicators, including inflation trends and Federal Reserve policy decisions. If inflation continues to ease and the labor market remains strong, further rate reductions could be on the horizon, offering additional support to the housing market.
For now, the dip to 6.67% provides a window of opportunity for homebuyers and refinancers seeking more favorable borrowing conditions. As the summer progresses, market participants will closely monitor economic developments and policy signals that could influence mortgage rates and housing affordability.
