The average 30-year fixed-rate mortgage has fallen below 7%, averaging 6.63% according to Freddie Mac’s Primary Mortgage Market Survey. This marks the lowest level since October 2024 and reflects a decline from 6.72% the previous week.
This drop follows declining Treasury yields, driven by economic data signaling a weakening U.S. economy, which has boosted hopes for potential Federal Reserve rate cuts in September. The Mortgage Bankers Association reported a 3.1% increase in mortgage applications for the week ending August 1, as borrowers took advantage of these lower rates.
A decline from 7% to 6.63% reduces monthly mortgage payments, making homes more affordable. For a $300,000 loan, this drop could save borrowers approximately $70-$100 per month, enhancing affordability for first-time buyers and those with tighter budgets.
Register for Tekedia Mini-MBA edition 19 (Feb 9 – May 2, 2026): big discounts for early bird.
Tekedia AI in Business Masterclass opens registrations.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab: From Technical Design to Deployment (next edition begins Jan 24 2026).
The Mortgage Bankers Association reported a 3.1% increase in mortgage applications for the week ending August 1, 2025, as buyers capitalized on lower rates. This suggests a potential uptick in home purchase activity, particularly among first-time buyers and renters looking to enter the market.
The National Association of Realtors (NAR) estimates that a drop to 6% could make homes affordable for 5.5 million more households, with 550,000 potentially buying within 12-18 months. While rates are not yet at 6%, the current decline could stimulate sales, especially for existing homes, which represent over 85% of transactions.
Many homeowners with sub-4% rates from 2020-2021 have been reluctant to sell due to higher current rates. A drop below 7% may encourage some to list their homes, increasing inventory, though the effect may be gradual as over 60% of mortgages still have rates below 4%.
Lower rates create opportunities for borrowers with rates above 7% (e.g., 700,000 Gen Xers and 1.2 million Millennials) to refinance, potentially reducing monthly payments or shortening loan terms. Freddie Mac notes that shopping around can save thousands, amplifying refinance interest. Refinancing volume is expected to rise modestly, as many homeowners still hold historically low rates from the pandemic era (2.65%-3.2%), limiting widespread activity.
Increased demand from lower rates could push home prices higher, especially in markets with low inventory. The Case-Shiller Home Price Index shows a 53.5% rise in home prices from January 2020 to September 2024, with a modest 2.8% increase since. Strong demand and limited supply (4.7 months of existing home inventory in June 2025) may sustain price growth.
Some markets may see price declines due to increased supply, but high-demand areas could face continued price pressure, offsetting affordability gains from lower rates. The National Association of Home Builders (NAHB) reported a slight uptick in builder sentiment (from 32 to 33 in July 2025), but it remains negative due to elevated rates and economic uncertainty. Lower rates could encourage more construction, though trade policy headwinds and labor costs may limit growth.
The rate drop aligns with declining Treasury yields, driven by expectations of Federal Reserve rate cuts in September 2025. However, persistent inflation and potential tariff impacts could keep rates volatile, with forecasts suggesting a range of 6.4%-6.8% by year-end. Economic data indicating a weakening economy may further lower rates, but this could also reduce consumer confidence, tempering housing demand.
Existing home sales in June 2025 declined 2.7% month-over-month, but the pace slightly exceeds last year’s levels, suggesting stabilization. Lower rates could reverse this decline, though high prices and low inventory continue to challenge affordability. Existing home inventory rose to 4.7 months in June 2025 from 4.0 months a year ago, indicating a slow increase in supply.
Only 2.1% of mortgaged properties were underwater in Q1 2025, and 46% were equity-rich, providing a buffer against foreclosures despite a 49.6% increase in Q1 foreclosures (61,660) compared to Q4 2024. This stability supports market resilience. Despite the rate drop, affordability remains strained. Median home prices reached $416,900 in Q1 2025, up from $208,400 in Q1 2009.
Experts predict rates will remain in the 6.4%-6.8% range through 2025, with a potential dip to 6% by late 2026, suggesting gradual improvement rather than a dramatic market shift. Homebuyers can benefit by shopping around for rates, exploring rate buydowns, or considering adjustable-rate mortgages (ARMs) for lower initial costs, while sellers may see increased interest but face competition in high-demand markets.