Mortgage Rates Drop 6% as Bond Yields Ease

On June 4, 2025, mortgage and refinance interest rates saw a significant decrease, primarily due to a drop in bond yields. The average rate for a 30-year fixed refinance mortgage fell to 6.91%, down from 6.97% the previous day. Similarly, the 15-year fixed refinance mortgage rates held steady at 6.16%. The 5/1 adjustable rate mortgage (ARM) averaged 6.05%, continuing to offer lower initial interest rates compared to fixed-rate loans. This decline in rates was part of a broader trend, with the 30-year fixed mortgage rate dropping to 6.97%, its lowest point since early May. The decrease in rates was driven by the easing of bond yields, which have been a significant factor in influencing mortgage rates.

The current economic environment, marked by a steady decline in inflation and a strong job market, has led to speculation about potential rate cuts by the Federal Reserve. However, experts note that mortgage rates do not directly correlate with Fed policy changes but are more closely tied to the 10-year Treasury yield, which has been fluctuating between 4.5% and 5%. According to analysts, mortgage rates are expected to remain in the mid-to-upper 6% range through mid-2025, regardless of any Fed actions. The consensus among mortgage professionals is that while waiting for lower rates might seem prudent, buying a home now could be advantageous for those who are financially ready. The current market offers less competition, providing buyers with better negotiating power and the potential for concessions or price reductions. Additionally, today's rates, while higher than pandemic-era lows, are not historically high when compared to the average 30-year fixed rate since the 1970s. Furthermore, the option to refinance later, as rates are expected to dip to around 6.2% or 5.5% by late 2025 or 2026, adds another layer of flexibility for homebuyers. Home prices are also projected to rise nearly 5% over the next year, making it financially beneficial to purchase now and build equity while prices climb.