June 27, 2025 — United States — In a welcome turn for homebuyers, mortgage rates have extended their winning streak, hitting a seven-week low as optimism grows around a potential Federal Reserve rate cut in July. The average 30-year fixed-rate mortgage dropped to 6.77% this week, marking a significant shift in market sentiment following months of high borrowing costs.
According to Freddie Mac’s latest report, the 30-year fixed rate declined by 4 basis points from last week, and nearly 0.25% since early June. The steady drop in rates over the last five days reflects a broader pivot in investor expectations regarding the path of the Federal Funds Rate, and it’s giving the real estate market a glimmer of hope amid ongoing affordability challenges.
A Streak of Declines: What’s Driving Mortgage Rates Down?
Mortgage rates have been on a downward slide since peaking around May 21. The trend became more pronounced after June 6, as the market began interpreting recent economic data as supportive of looser monetary policy. On Thursday alone, the average 30-year fixed rate dropped by 0.07%, contributing to a total decline of nearly 25 basis points over the past three weeks.
While economic indicators have played a role, analysts note that the real driver is shifting expectations about the Federal Reserve. The market appears increasingly convinced that the Fed is preparing to cut interest rates—possibly as early as July. That shift is affecting Treasury yields and, by extension, mortgage rates.
“The decline is largely tied to recent shifts in the bond market,” said Samir Dedhia, CEO of One Real Mortgage. “Treasury yields are pulling back due to improving investor sentiment around the possibility of a Fed rate cut.”
The 10-year Treasury yield, which mortgage rates tend to closely follow, has dipped in recent weeks amid easing inflation concerns and a growing belief that the central bank will act sooner rather than later.
Mortgage Rate Trends: Five-Day Winning Streak and Counting
This week marks the fifth straight day of mortgage rate declines—a streak that could spell good news for potential homebuyers. While it’s not yet an unprecedented run, market watchers caution that extended winning streaks often lead to short-term rebounds.
“The greater the number of days in a mortgage rate winning streak, the greater the odds of a bounce,” said one market analyst. “That bounce could be small or it could be a return to recent highs—there’s no way to know. But the risk does increase the longer the streak goes on.”
Typically, mortgage rate analysts start cautioning about a potential reversal once a winning streak hits eight or more days. Some of the longest such streaks in recent history have lasted up to 10 days or more, but these are exceptions rather than the rule.
Mortgage Affordability Still a Major Concern
Despite the downward shift in rates, housing affordability remains strained. The median sale price of a home as of June 22 was $400,266, according to real estate brokerage Redfin. At a 6.81% interest rate, that translates into an estimated monthly mortgage payment of about $2,820 for a standard 30-year loan with 20% down.
The drop in rates, even if incremental, could save borrowers thousands of dollars over the life of a mortgage. For many prospective buyers, that could mean the difference between qualifying for a loan or continuing to rent.
“Even small improvements in rates can make a meaningful difference in monthly payments and long-term savings,” said Dedhia.
The Fed’s Role: Pressure Mounts Ahead of July Decision
The Federal Reserve’s next policy meeting is scheduled for mid-July, and market sentiment is increasingly pointing toward a rate cut. Investors are pricing in a higher likelihood of easing, as inflation data continues to moderate and economic growth shows signs of slowing.
However, the Fed has not yet committed to a rate cut. Its benchmark rate decisions do not directly control mortgage rates but have a strong influence on investor behavior and Treasury yields, which in turn impact home loan costs.
Former President Donald Trump and current Federal Housing Finance Agency (FHFA) Director Bill Pulte have both criticized Fed Chair Jerome Powell for not acting swiftly to reduce interest rates. Pulte, who also oversees Fannie Mae and Freddie Mac, recently stated that Powell is “really hurting the housing market” by maintaining restrictive monetary policy.
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Why Mortgage Rates Don’t Always Follow the Fed
While the Fed Funds Rate is a key driver of overall economic conditions, mortgage rates are more directly influenced by the bond market—specifically, the yield on the 10-year Treasury note. When investors anticipate lower inflation and slower growth, Treasury yields decline, which brings mortgage rates down as well.
Conversely, when inflation fears rise or the economy strengthens unexpectedly, yields climb, leading to higher mortgage rates. The recent drop in both yields and mortgage rates suggests the market is leaning into a more dovish Fed stance ahead of July.
Home Sales Still Sluggish Despite Rate Dip
Despite the positive movement in borrowing costs, the housing market remains relatively stagnant. Pending home sales—contracts signed but not yet closed—rose just 1.8% in May compared to the previous month, according to the National Association of Realtors (NAR).
Rising home prices and limited inventory continue to deter potential buyers, especially in high-demand markets. Lawrence Yun, chief economist at the NAR, emphasized that mortgage rates remain the most significant factor in homebuying decisions.
“Mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than income growth,” Yun said in a recent statement.
Even though wages are rising faster than home prices in some areas, high monthly payments remain a barrier for many Americans, particularly first-time buyers.
What Buyers Should Know Now
For homebuyers currently in the market, this week’s mortgage rate dip presents a unique opportunity to lock in lower financing costs. If the Fed does cut rates in July, it could set off further declines—but the market’s response could also be muted if the move is already priced in.
On the flip side, if the Fed decides to hold rates steady, mortgage rates could rebound. Experts suggest buyers should stay alert and consider locking in rates if they’re close to making a purchase.
“Rate locks can provide protection in uncertain times,” said a mortgage broker based in Chicago. “You may not get the lowest rate possible, but you’ll avoid the risk of a sudden jump.”
Looking Ahead: Will Rates Keep Falling?
The big question now is whether this mortgage rate rally can continue. History suggests that prolonged winning streaks often encounter short-term reversals. If the streak continues beyond eight or ten days, market volatility is likely to increase.
Still, broader indicators favor a continued easing environment. With inflation cooling, unemployment stable, and the Fed under mounting pressure, the odds of a rate cut appear to be increasing.
That said, investors are watching every economic data point closely. Unexpected inflation spikes, geopolitical tensions, or a shift in the Fed’s messaging could all lead to sudden changes in direction.
Bottom Line
Mortgage rates have dropped to their lowest level in nearly two months, offering potential relief to homebuyers in an otherwise challenging housing market. While affordability remains a concern, the recent dip in rates could translate into real savings—especially if the trend continues through the summer.
With the Federal Reserve’s next move on the horizon and financial markets reacting quickly to any shift in sentiment, prospective buyers and homeowners considering refinancing should stay informed and consider locking in rates before the current streak comes to an end.