Mortgage Rates Dip 4 Basis Points, Still Volatile

On July 18, 2025, the average interest rate for a 30-year, fixed-rate conforming mortgage loan in the U.S. stood at 6.753%, marking a slight decrease of approximately 4 basis points from the previous day. However, this rate is still up by about 4 basis points from a week ago. This fluctuation reflects the ongoing volatility in the mortgage market, which has seen rates hover around the 7% mark for an extended period.

The current rates for various mortgage types show a mixed picture. The 30-year jumbo mortgage rate is at 7.023%, up from 6.949% a week ago and 6.854% a month ago. The 30-year FHA mortgage rate is 6.535%, slightly higher than the 6.528% from a week ago and 6.504% from a month ago. The 30-year VA mortgage rate is 6.356%, down from 6.414% a week ago but up from 6.397% a month ago. The 30-year USDA mortgage rate is 6.535%, up from 6.423% a week ago and 6.491% a month ago. The 15-year conventional mortgage rate is 5.915%, up from 5.898% a week ago but down from 6.037% a month ago.

The recent dip in mortgage rates comes after a period of sustained increases, with many observers expecting rates to soften as the Federal Reserve began reducing the federal funds rate last September. However, this decrease was short-lived, and rates quickly climbed afterward. By January 2025, the average rate on a 30-year, fixed-rate mortgage surpassed 7% for the first time since May 2024, a significant jump from the historic low of 2.65% recorded in January 2021.

Experts agree that without another major crisis, mortgage rates in the 2% to 3% range are unlikely to return. However, rates around the 6% mark are possible if the U.S. manages to control inflation and lenders remain optimistic about economic prospects. The modest decline in rates at the end of February and the brief dip below 6.5% in early April indicate that rates are sensitive to economic conditions and policy changes.

Current economic uncertainties, including potential policy changes and their impact on the labor market and inflation, add to the complexity of the mortgage rate environment. Homebuyers face high mortgage rates, but options like negotiating rate buydowns with builders for newly constructed properties can make purchases more manageable.

To secure the best mortgage rate, homebuyers should focus on improving their financial profile. This includes maintaining excellent credit, with a score of 740 or higher considered top tier for home loan applications. A low debt-to-income (DTI) ratio is also crucial, with a DTI of 36% or below typically preferred by lenders. Getting prequalified with multiple lenders, including large banks, local credit unions, and online lenders, can help homebuyers compare offers and find the best deal.

Historically, mortgage rates around 7% are not unusually high. From the 1970s through the 1990s, such rates were more or less the norm, with significant spikes in the early 1980s. The current rates feel high due to the recent memory of rates between 2% and 3%, which were possible due to unprecedented government action aimed at preventing recession during the global pandemic.

Several factors impact mortgage interest rates, including the U.S. economy, national debt, demand for home loans, and the Federal Reserve’s actions. When lenders fear inflation, they may raise rates to protect their long-term profits. The national debt can drive interest rates higher when the government borrows large sums. Demand for home loans can also influence rates, with lenders adjusting rates based on the number of borrowers. The Federal Reserve’s actions, including changes to the federal funds rate and management of its balance sheet, play a significant role in mortgage rates.

Comparing rates on different types of loans and shopping around with various lenders are essential steps in obtaining the best mortgage. For homebuyers with excellent credit, a conventional mortgage might be the ideal choice. However, those with lower credit scores may benefit from an FHA loan. Exploring options with different banks, credit unions, and online lenders can make a significant difference in overall costs, with potential annual savings of $600 to $1,200 in a high-interest rate market.