Mortgage Rates Fall Again; But for How Long?

This year, U.S. mortgage interest rates have been declining, albeit at a gradual pace. It is safe to conclude that volatility in the mortgage market has vanished compared to previous years. According to Freddie Mac’s Primary Mortgage Market Survey (PMMS)*, the average fixed-rate 30-year mortgage fell to 6.81 per cent for the week ending June 18, down three basis points and six basis points from the same time a year ago. Likewise, mortgage rates on a 15-year home loan have remained below six per cent for virtually all of June.

Getting Into the Numbers

“Mortgage rates moved lower, with the average 30-year fixed rate reaching a four-week low,” said Sam Khater, Freddie Mac’s chief economist, in the weekly report. “More available inventory to choose from, coupled with this week’s decline in mortgage rates, could be the spark to get potential homebuyers off the sidelines.”

Similar numbers have been observed in alternative mortgage market snapshots. The Mortgage Bankers Association (MBA) reported that the average contract interest rate for 30-year fixed-rate mortgages tumbled nine basis points to 6.84 per cent for the week ending June 13. This is the lowest level since April.

Mortgage News Daily’s rate index is also slightly below the 6.9 per cent mark. Before President Donald Trump’s April 2 “Liberation Day” announcement of new global trade measures, 30-year mortgage rates were falling sharply, hitting a 2025 low of about 6.6 per cent.

A Deeper Dive: Treasury Yields

The mortgage market tracks the yield on the benchmark ten-year Treasury security because homeowners typically hold mortgages for a specific length of time, as they tend to refinance or sell within ten years. In addition, returns on mortgage-backed securities, home loans sold to investors on the open market, are closely tied to the ten-year yield, as they compete for investment dollars.

The Treasury market has been influenced by a diverse array of factors, including concerns about the federal government’s fiscal health, a Moody’s downgrade, global trade policy changes that raised concerns about economic growth prospects, foreign holdings of U.S. debt, and geopolitical strife.

At the same time, the ten-year yield remains little changed from a year ago and is lower than it was at the beginning of 2025. As of June 19, 2025, the ten-year is trading at around 4.39 per cent.

Therefore, predicting where mortgage rates will head largely depends on the direction of the U.S. bond market in the second half of the year.

Policies and More

The Federal Reserve has made it clear that it is waiting for more clarity on the inflation effects of recent White House trade actions. The U.S. central bank left the benchmark federal funds rate, a key policy rate that influences consumer borrowing costs and the federal government’s interest payments, unchanged for the fourth straight meeting at the June Federal Open Market Committee (FOMC) get-together.

According to data* from the CME FedWatch Tool, the Fed is not expected to lower interest rates until September. Additionally, looking ahead to 2026 and 2027, monetary policymakers are forecasting fewer interest rate cuts than initially expected earlier this year.

Current jobs and inflation figures remain inconclusive, and the Fed has made it clear that it cannot commit to any rate cuts in the near term. As Fed Chair Powell* put it, “So it is really not at all clear what it is we should do,” highlighting just how uncertain monetary policy direction is.

Economists’ expectations for higher inflation have yet to materialize in the hard economic data. Indeed, the Consumer Price Index (CPI) report indicated that core inflation, which excludes the volatile energy and food categories, rose at a smaller-than-expected pace of 0.1 per cent in May.

Where are Interest Rates Headed?

So, when could mortgage rates fall again? Whether elevated mortgage interest rates will weigh on demand remains to be seen. Joel Kan, the vice president and deputy chief economist at the Mortgage Bankers Association, recently noted that mortgage applications have declined in seven of the last ten weeks.

“Even with lower average mortgage rates, applications declined over the week as ongoing economic uncertainty weighed on potential homebuyers’ purchase decisions,” he said in a report.

Ultimately, the 30-year mortgage rate could continue to stay below seven per cent but fail to fall below six per cent, forcing prospective homebuyers to grapple with persistent housing affordability challenges.

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