Housing News

Mortgage Rates Decline for Second Week in a Row—With All Eyes Now on the Fall

There’s good news for anyone thinking about buying a home: mortgage interest rates dipped for the second week in a row. That offered a little more breathing room for buyers facing affordability headwinds.

The average mortgage rate ticked down to 6.72% for 30-year, fixed-rate loans in the week ending July 31, according to Freddie Mac data. That was a further tick down from 6.74% the week prior.

For comparison, rates averaged 6.73% during the same period in 2024.

“The 30-year fixed-rate mortgage showed little movement, remaining within the same narrow range for the fourth consecutive week,” Freddie Mac Chief Economist Sam Khater said in a statement. “Continued economic growth, along with moderating house prices, and rising inventory, bodes well for buyers and sellers alike.”

Indeed, in today’s housing market, every fraction of a percentage point counts. On a $400,000 home with 20% down, that two-basis-point drop—from 6.74% to 6.72%—can save buyers about $2,900 over the life of a 30-year mortgage.

Those savings grow if rates continue to trend downward.

Despite rates moving down slightly, mortgage applications fell 3.8%—to their lowest level since May—for the week ending July 25, according to the Mortgage Bankers Association. This comes after three consecutive weeks of gains.

However, this isn’t unusual in the middle of summer. Home sales generally slow down with the back-to-school season approaching and many would-be buyers on vacation. 

The rate shift comes the day after the U. S. Federal Reserve voted to keep interest rates unchanged, which came as no surprise to economists. While mortgage rates don’t follow the Fed rate exactly, they often respond to how investors interpret the Fed’s next moves.

If the Fed lowers rates, mortgage rates are likely to follow.

“The question now is whether we should expect a September rate cut and what those expectations should mean for mortgage rates,” said Lisa Sturtevant, chief economist at Bright MLS. The multiple listing service covers the Mid-Atlantic region.

Many economists believe the Fed may begin cutting rates as soon as September. If that happens, mortgage rates could inch closer to 6%, making homeownership more affordable heading into the fall market.

“If a September rate cut starts to be more likely, it is possible that we could see mortgage rates edge downward at the end of the summer, similar to what we saw last year at this time,” added Sturtevant. (Rates fell to a low of 6.08% last September.)

Still, there are a few inflation unknowns that will likely influence the fall Fed meeting. If inflation ticks up, mortgage rates could remain elevated longer than hoped.

But for now, the trend of rates heading south is encouraging for buyers and sellers.