U.S. Mortgage Rates Hold Near 7% Amid Fed Cuts, Mirroring 1970s-90s Trends

On July 23, 2025, U.S. mortgage rates showed minimal movement, with the 30-year fixed-rate conforming loan averaging 6.732%, a 1-basis-point decline from the previous day and a 3-basis-point drop from a week ago. The 30-year jumbo mortgage rate stood at 6.797%, reflecting a 137-basis-point decrease from its level a week earlier but remaining higher than the 6.874% recorded a month prior. Meanwhile, the 30-year FHA rate dipped to 6.461%, down from 6.473% a week ago. The 30-year VA rate reached 6.342%, while the 30-year USDA rate fell to 6.413%. For shorter-term borrowing, the 15-year fixed-rate mortgage averaged 5.887%, down marginally from 5.903% a week ago.

The data, sourced from mortgage data firm Optimal Blue, highlights a market where rates have remained near 7% for much of the year. Despite the Federal Reserve’s rate cuts initiated in September 2024, mortgage rates failed to follow a downward trend. A brief dip occurred ahead of the September Fed meeting, but rates quickly rebounded. By January 2025, the 30-year fixed-rate average surpassed 7%, marking its first return to that level since May 2024. This contrasts sharply with the post-pandemic lows of 2.65% in early 2021, when government stimulus measures aimed to stabilize the economy. Experts now consider rates in the 2%–3% range unlikely in the near future, with 6%–7% becoming a new norm if inflation is contained and economic stability is restored.

Historical context underscores the current environment. Rates around 7% were common in the 1970s–1990s, with spikes reaching over 18% in the early 1980s. However, the prolonged period of low rates following the 2020 pandemic has left many borrowers unaccustomed to higher costs. Analysts note that while elevated rates pose challenges for affordability, they are not unprecedented. The key uncertainty lies in the Federal Reserve’s balance sheet management, which has shifted toward shrinking its holdings of mortgage-backed securities, indirectly exerting upward pressure on rates. Additionally, concerns over potential policy shifts—such as tariffs or immigration enforcement under a potential second Trump administration—have added volatility to the labor market and inflation outlook.

Market participants remain focused on economic fundamentals that influence borrowing costs. Inflation expectations, national debt levels, and housing demand all play critical roles. Lenders adjust rates to mitigate risks from rising inflation or tight credit conditions. For borrowers, navigating the current landscape requires strategic preparation. Maintaining strong credit profiles, minimizing debt-to-income ratios, and shopping rates across lenders can help secure more favorable terms. Prequalification with multiple lenders, including banks, credit unions, and online platforms, allows buyers to compare offers and account for differences in loan terms, such as discount points or closing costs.

The persistence of high rates has created a market dynamic where some homeowners remain in their homes due to “golden handcuffs”—pandemic-era low rates making refinancing or relocation unattractive. For new buyers, the challenge lies in balancing long-term costs with immediate affordability. While the path to lower rates remains uncertain, the current environment emphasizes the importance of flexibility and informed decision-making. As the market evolves, continued vigilance on macroeconomic signals and central bank actions will be critical for both lenders and borrowers navigating the complex mortgage landscape.