Mortgage rates trended slightly downward on Thursday after the Federal Reserve held firm on its rate policy, maintaining a wait-and-see stance despite mounting political pressure.
The average rate on 30-year fixed home loans registered 6.72% for the week ending July 31, down just slightly from 6.74% last week, according to Freddie Mac. Rates averaged 6.73% during the same period in 2024.
“The 30-year fixed-rate mortgage showed little movement, remaining within the same narrow range for the fourth consecutive week,” says Sam Khater, Freddie Mac’s chief economist. “Continued economic growth, along with moderating house prices and rising inventory, bodes well for buyers and sellers alike.”
During a Federal Open Market Committee (FOMC) meeting on Wednesday, policymakers left the central bank’s key rate unchanged at an elevated range of 4.25% to 4.5%, pointing to overall good economic conditions and having the flexibility in navigating emerging risks, including possible price hikes driven by President Donald Trump’s tariffs.
Notably, for the first time in 30 years, two members of the FOMC—Fed Govs. Michelle Bowman and Christopher Waller—dissented from the majority, voting for a quarter-point rate cut.
“While the two dissenting votes did not alter the policy outcome, they highlighted growing internal debate over the current monetary stance,” says Realtor.com® economist Jiyai Xu.
Just hours before the meeting, Trump took to social media to once again call on Fed Chair Jerome Powell to slash rates immediately to make it easier for Americans to buy and refinance homes.
Powell so far has resisted pressure from the White House, opting instead for a more measured approach. In recent comments, he pointed to rising inflation above the Fed’s 2% target and strong jobs numbers as the key reasons for holding off on rate cuts.
Additionally, Powell reminded the public on Wednesday that the Fed does not set mortgage rates. The central bank’s policy affects mortgage rates indirectly through the bond market.
Xu predicts that July’s consumer price index—especially tariff-related inflation data—will be a key reference point for the Fed’s next move in September.
Futures markets and economists say there is a good chance the Fed will slash its key rate by a quarter-point during the upcoming FOMC meeting, although Powell insisted that no decision has been reached.
On the housing front, with mortgage rates remaining elevated, affordability continues to be a major hurdle for many potential buyers, particularly younger adults trying to break into the market by purchasing a starter home.
As a result of these ongoing challenges, the homeownership rate for those aged 35 and younger has plummeted to its lowest second-quarter level since before the COVID-19 pandemic.
However, there is some hope on the horizon.
“Fortunately, the market has been shifting toward a more buyer-friendly environment, with more homes available and more time to weigh options—giving buyers a bit more breathing room and bargaining power,” says Xu.
How mortgage rates are calculated
Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health. They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends, like economic growth and inflation expectations. Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.
When the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to go up. Conversely, signs of falling inflation or weakness in the labor market usually send Treasury yields lower, causing mortgage rates fall.
The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account.
Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk. Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.
How your credit score affects your mortgage
Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you’ll receive. The higher the credit score, the lower the interest rate you’ll qualify for.
The credit score you need will vary depending on the type of loan. A score of 620 is a “fair” rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.
Homebuyers with credit scores of 740 or higher are typically considered to be in very good standing and can usually qualify for better rates.
Different types of mortgage loan programs have their own minimum credit score requirements. Some lenders have stricter criteria when evaluating whether to approve a loan. They want to make sure you’re able to pay back the loan.
