Interest rates on mortgages drop for the second consecutive day - June 20, 2025
Let's Dish on Mortgage Rates:
After a two-day slide, 30-year mortgage rates have taken a dip, landing at a 6.90% average on June 18, 2025. Various mortgage types followed suit, also seeing a decrease. Shopping around for the best mortgage rate is always a smart move, regardless of the kind of home loan you're eyeing.
Check out Today's Mortgage Rates
Today's hot take: Rates on 30-year new purchases dropped two basis points, marking a partial reversal of the two-day climb that occurred earlier in the week. This brings us closer to the six-week low of 6.87% we hit last week.
Compared to three weeks ago, current rates are looking pretty good. The 30-year average skyrocketed to a one-year high of 7.15% at that time but remains below late 2023 levels when the average peaked at an 8.01% historic high. However, there was a historic plunge in rates last fall, with the 30-year average sinking to a two-year low of 5.89%.
The slide continued with 15-year mortgages, which dropped 2 basis points to a 5.93% average. This is more affordable than mid-April's 6.31% reading, the highest in almost a year. It's also 1.15 percentage points below the 7.08% October 2023 peak, a historic 23-year high. But just like 30-year loans, 15-year rates fell to a two-year low last September, dipping to 4.97%.
Jumbo 30-year mortgage rates witnessed a 4 basis point decrease, marking a two-day drop of 10 points. The new average of 6.85% is significantly less than the 10-month high of 7.16% we saw in mid-May. It's also much lower than the 8.14% peak in October 2023, a historic 23-year high for jumbo 30-year loans, but still pricier than the cheapest level of 6.24% it reached last fall.
Weekly Freddie Mac Average
On Thursdays, Freddie Mac, a government-sponsored entity that buys mortgage loans, publishes a weekly average of 30-year mortgage rates. Freddie's average decreased 3 basis points this week, sitting at 6.81%. Last September, the average hit an impressive low of 6.08%, but it saw a historic surge to 7.79%, a 23-year peak, in October 2023.
It's essential to note that Freddie Mac's average differs from the Investopedia 30-year average. This discrepancy arises from Freddie calculating a weekly average of five previous days of rates, while Investopedia provides a daily reading offering a more precise and timely indicator of rate movement. Additionally, the criteria for included loans (e.g., down payment, credit score, etc.) varies between the two methodologies.
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Caution
The rates we publish may not align directly with the teaser rates you'll find online. These advertised rates are carefully selected to be the most attractive, often involving paying points in advance or being based on a borrower with an ultra-high credit score or smaller-than-typical loan. Keep in mind that the rate you eventually secure will depend on your credit score, income, and other factors, so it may differ from the averages you see here.
Monthly mortgage payments will be influenced by your home price, down payment, loan term, property taxes, homeowners insurance, and loan interest rate (which is heavily dependent on your credit score). Take a gander at the inputs below to get a rough idea of what your monthly mortgage payment might be.
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What Causes Mortgage Rates to Fluctuate?
The dance of mortgage rates is a complex one, with factors such as the 10-year Treasury yields, the Federal Reserve's monetary policy, and competition among mortgage lenders all playing significant roles.
Mortgage rates generally follow the 10-year U.S. Treasury bond yield closely. This is because mortgage-backed securities (MBS), which underlie mortgage loans, compete with Treasuries in the bond market. Typically, mortgage rates are priced about 2% higher than the 10-year Treasury yield to account for added risks. If the yield on the 10-year Treasury rises, mortgage rates generally increase as investors demand higher returns on mortgage bonds to remain competitive. Conversely, a drop in 10-year Treasury yields tends to lower mortgage rates[1][2][4].
The Federal Reserve plays an indirect role in setting mortgage rates by influencing the federal funds rate, the interest rate banks charge each other for overnight loans. Changes in the Fed’s short-term rates affect overall borrowing costs in the economy. When the Fed raises short-term interest rates to combat inflation or cool the economy, it increases banks' costs, which typically causes mortgage rates to rise. When the Fed lowers rates, mortgage rates often decline as well. However, because mortgage loans are long-term in nature, their rates are more tied to long-term bond yields than to the Fed Funds rate directly[1][2][3][4].
Competition among mortgage lenders can also impact mortgage rates. Each lender balances their operational costs, desired profit margins, and the rates on mortgage-backed securities they hold or sell. Strong competition and low demand for mortgages may lead to lower rates, while lesser competition and high demand may result in higher mortgage rates[1][2][5].
[1] Fed Funds Rate (Federal Reserve), https://www.investopedia.com/terms/f/fedfund.asp
[2] 10-Year Treasury Yield (Investopedia), https://www.investopedia.com/terms/y/yield.asp
[3] Federal Open Market Committee (FOMC) (Federal Reserve), https://www.investopedia.com/terms/f/fomc.asp
[4] Mortgage-Backed Securities (MBS) (Investopedia), https://www.investopedia.com/terms/m/mbs.asp
[5] Competition (Business Dictionary), https://www.investopedia.com/terms/c/competition.asp
Remember: The rise and fall of mortgage rates are a dance of intricate factors, with the 10-year Treasury yields, the Federal Reserve's monetary policy, and competition among mortgage lenders all vying for center stage.
In a nutshell:
- The dance of mortgage rates revolves around the 10-year Treasury yield, Federal Reserve's monetary policy, and competition among mortgage lenders.
- The 10-year Treasury yield and mortgage rates move together due to their competition in the bond market, with higher yields generally leading to higher mortgage rates.
- The Federal Reserve influences mortgage rates indirectly by managing the federal funds rate, impacting overall borrowing costs and bond market expectations.
- Competition among mortgage lenders contributes to the variation in rates offered to consumers, with operational costs, demand, and individual borrower credit profiles playing a role.
These interconnected factors govern the day-to-day movements and overall trends in mortgage interest rates[1][2][4][5].
- In the realm of personal finance, tokenization could offer a unique avenue for investing in mortgage-backed securities (MBS), allowing individuals to buy fractions of these assets and potentially benefit from the fluctuations in 30-year mortgage rates.
- Another intriguing avenue for investing could be Initial Coin Offerings (ICO) focused on sustainable housing projects or platforms that facilitate peer-to-peer lending in the mortgage sector. This could provide an alternative means for investing in personal finance and real estate, while also supporting eco-friendly development.
