Mortgage Rates Drop 3 Basis Points to 6.644%

On July 3, 2025, the average interest rate for a 30-year, fixed-rate conforming mortgage loan in the U.S. decreased to 6.644%, marking a drop of approximately 3 basis points from the previous day and 12 basis points from a week ago. This slight decline comes after a period of relative stability, with rates hovering around the 7% mark since the beginning of the year.

The decrease in mortgage rates is a welcome relief for potential homebuyers who have been grappling with high interest rates for several months. The average rate for a 30-year, fixed-rate mortgage passed 7% for the first time since May 2024, according to Freddie Mac figures. This is a significant increase from the historic average low of 2.65% witnessed in January 2021, when the government was still attempting to boost the economy and prevent a pandemic-induced recession.

Experts agree that mortgage rates in the 2% to 3% range are unlikely to return in the near future, barring another economic catastrophe. However, rates around the 6% level are feasible if the U.S. succeeds in controlling inflation and lenders feel confident about the economic outlook. In fact, rates dipped slightly at the end of February, falling closer to the 6.5% mark than had been observed for some time. They even fell below 6.5% for a brief moment in early April before rising once again.

Currently, with uncertainty about how far President Donald Trump will go in implementing policies such as tariffs and deportations, some analysts fear the labor market could tighten and inflation could reignite. In this environment, U.S. homebuyers are faced with high mortgage rates—though some can still find ways to make their purchase more affordable, such as negotiating rate buydowns with a builder when buying newly constructed housing.

While economic conditions are out of your control, your financial profile as an applicant also has a major impact on how low a mortgage rate you’re offered. With that in mind, strive to do the following: ensure your credit is in excellent shape, keep your debt-to-income (DTI) ratio low, and get prequalified with multiple lenders. You may wish to try a mix of large banks, local credit unions, and online lenders and compare offers. Plus, getting connected with loan officers at several different institutions can help you evaluate what you’re looking for in a lender and which one will be best able to meet your needs. Just make sure when you’re comparing rates that you’re doing it in a way that’s apples to apples—if one estimate relies on you purchasing mortgage discount points and another does not, it’s important to understand there’s an upfront cost for buying down your rate with points.

An important piece of context to the discussion surrounding high mortgage rates is that today’s rates in the ballpark of 7% feel high because of the recent memory of rates in the range of 2% to 3%. Those rates were possible as the federal government took virtually unprecedented action trying to prevent recession as the country battled a global pandemic. However, under more typical economic conditions, experts agree we’re unlikely to see such dramatically low interest rates again. And, historically, rates in the vicinity of 7% are not abnormally high.

Consider this chart tracking Freddie Mac data on the 30-year, fixed-rate mortgage average. From the 1970s through the 1990s, such rates were more or less the norm, with a massive spike in the early 1980s. In fact, September, October, and November of 1981 all saw mortgage interest rates above 18%. Still, that historical context is scant comfort for homeowners who may want to move but are locked in with a once-in-a-lifetime low interest rate. Such situations are common enough in the current market that low pandemic-era rates keeping homeowners put when they’d otherwise move have become known as the “golden handcuffs.”

The state of the U.S. economy may well be the biggest thing impacting mortgage rates. If lenders are worried about inflation, they can hike rates to protect their future earnings. And, the national debt is another big factor. When the government has to borrow large sums to cover its spending, that can push interest rates higher. Demand for home loans plays a big role too. If not many consumers are seeking loans, lenders might cut rates to attract borrowers. But if demand is high, they might raise rates to cover the costs of handling more loans. The Federal Reserve’s actions are also crucial. The Fed can influence mortgage rates both by adjusting the federal funds rate and by managing its balance sheet. That first factor, the federal funds rate, gets a lot of coverage in the media. When the Fed hikes or cuts it, mortgage rates often follow. But keep in mind, the Fed doesn’t set mortgage rates directly, and they don’t always move in perfect step with the fed funds rate. The Fed also impacts rates on long-term financial products like mortgages via its balance sheet. During economic downturns, the central bank can buy assets like mortgage-backed securities (MBS) to inject money into the economy. But recently, the Fed has been trimming its balance sheet, letting assets mature without buying new ones. This tends to push interest rates up. So while everyone watches for federal funds rate decisions, what the Fed does with its balance sheet might matter even more for your mortgage rate.

Comparing rates on different types of loans and shopping around with different lenders are both important steps in getting the best mortgage for your situation. If your credit is in stellar shape, opting for a conventional mortgage could very well be the best choice for you. But, if your score is sub-600, an FHA loan may give you a chance a conventional loan would not. When it comes to shopping around with different banks, credit unions, and online lenders, it can make a tangible difference in how much you pay. Freddie Mac research shows that in a market with high interest rates, homebuyers may be able to save $600 to $1,200 annually if they apply with multiple mortgage lenders.