Mortgage Ticks Down to Four-Week Low Ahead of Fed Meeting

Mortgage rates edged down again on Wednesday, reaching a four-week low, as the market prepared for the latest Federal Open Market Committee (FOMC) at which the Federal Reserve opted to keep interest rates unchanged.

The average rate on 30-year fixed home loans decreased to 6.81% for the week ending June 18, down from 6.84% last week, according to Freddie Mac. Rates averaged 6.87% during the same period in 2024.

“Mortgage rates moved lower, with the average 30-year fixed rate reaching a four-week low,” says Sam Khater, Freddie Mac’s chief economist. “More available inventory to choose from, coupled with this week’s decline in mortgage rates, could be the spark to get potential homebuyers off the sidelines.”

After a busy six weeks since the previous FOMC meeting in early May—a period marked by major tariff policy changes, a better-than-predicted jobs report, and continued progress on inflation—the Fed met expectations by opting to keep interest rates steady at a range of 4.25% to 4.5% for the fourth consecutive time, despite President Donald Trump‘s persistent calls to lower them as soon as possible.   

Ahead of the FOMC meeting, Trump once again lashed out at Fed Chair Jerome Powell, calling him “stupid” for not lowering rates and floated the idea of putting himself at the head of the central bank, insisting that he would do “a much better job.”

The Fed signalled that it expects two rate cuts by the end of 2025, after raising its inflation forecast and lowering its economic growth projections from March.

“While pockets of economic uncertainty persist, consumer confidence has rebounded from its spring dip,” says Realtor.com® senior economic research analyst Hannah Jones.

Notably, the Fannie Mae Home Purchase Sentiment Index surged to its highest level of the year in May, signaling renewed optimism among aspiring homebuyers.

Following a lackluster spring selling season, steady mortgage rates and improving buyer sentiment may set the stage for a bustling summer housing market, according to Jones.

While home prices remain elevated, market conditions are gradually pivoting toward buyers, thanks to rising inventory, slower selling pace, and climbing price cuts. However, Jones points out that these shifts vary greatly by region. 

In many Northeast and Midwest metros, limited supply and high demand continue to create tight, competitive conditions, while many Southern metros see surging inventory and falling home prices following a construction boom. 

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.

So when the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to go up. Conversely, when Treasury yields decrease, 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.

Mortgage applications dipped by 2% from a week ago, according to the latest data from the Mortgage Bankers Association’s Weekly Mortgage Application survey ending on March 21. 

During the same period, purchase applications, involving the offer and agreement to buy a property, increased 1% from a week ago and 7% year over year, driven by a surge in FHA loan applications, according to Joel Kan, MBA’s vice president and deputy chief economist. 

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.

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.

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