Mortgage rates continued to fall Thursday, slipping to a 12-week low ahead of the holiday weekend as markets awaited key economic data before the next Federal Reserve policy meeting.
The average rate on 30-year fixed home loans decreased to 6.67% for the week ending July 3, down from 6.77% last week, according to Freddie Mac. Rates averaged 6.95% during the same period in 2024.
It marked the biggest one-week decline in mortgage rates since March, and the lowest level for rates since early April, when President Donald Trump's Liberation Day tariff announcement sent long-term bond yields into nosedive.
However, this week there was little in the way of headlines to drive mortgage rates lower, and investors may have simply been repositioning their portfolios for the end of the month and the second quarter.
Financial markets had also been growing more optimistic about the chances of a Federal Reserve rate cut later this month—although those hopes were dashed on Thursday morning when the June jobs report showed robust employment growth that beat expectations.
Regardless of why they are falling, the move lower for mortgage rates ahead of Independence Day will come as welcome news for prospective homebuyers struggling to find a home in their budget.
"Declining mortgage rates are encouraging and, while overall affordability challenges remain, we are seeing more sellers enter the market giving prospective buyers an advantage,” says Sam Khater, Freddie Mac’s chief economist.
New listings and active inventory continued to rise on an annual basis for the week ending June 28, and homes spent longer on the market, according to the Realtor.com® economic research team's weekly housing update.
Mortgage purchase applications jumped 16% last week compared to one year ago, showing renewed interest from buyers after a slow spring season, according to data from the Mortgage Bankers Association.
The uptick follows sluggish activity in May, when sales of new homes dropped 6.3% compared to a year earlier, and existing home sales dipped 0.7% annually.
"The reduction in sales is leading to slightly higher inventory levels and will help create a more buyer-friendly housing market, but the process is expected to be a gradual one as economic uncertainty persists," says Realtor.com Senior Economist Anthony Smith.
How mortgage rates are calculated
Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health. They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends, like economic growth and inflation expectations. Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.
When the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to go up. Conversely, signs of falling inflation or weakness in the labor market usually send Treasury yields lower, causing mortgage rates fall.
The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account.
Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk. Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.
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