July Mortgage Outlook: A Rate Drop, or More of the Same?
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July Mortgage Outlook: A Rate Drop, or More of the Same?

June 30, 2025
11:00 AM
4 min read
AI Enhanced
economyfinancial

Key Takeaways

Mortgage rates are likely to fall a little lower in July, continuing a gradual drop that began in June.

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4 min read

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real estate

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Published

June 30, 2025

11:00 AM

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NerdWallet

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Key Topics
economyfinancial

Mortgage rates are ly to edge a little lower in July, continuing the gradual decline we saw in June

So far, inflation hasn't risen from higher tariffs, and financial seem convinced that the Federal Reserve will cut short-term interest rates in the second half of the year

Together, those two factors could decrease mortgage rates or keep them more or less unchanged

When will inflation show up

Prices didn't jump higher in April or May, even though tariff hikes were announced April 2

It's possible that inflation hasn't risen yet because wholesalers and retailers filled their warehouses before April in anticipation of the higher taxes

Es will run out of those stockpiled items someday

When recently imported items hit the store shelves, the prices are ly to rise because of tariffs

Experts believe we will see a tariff-driven bump in inflation soon

Confirmation could come July 15

That's when the consumer price index for June is released. : Why mortgage rates may fall in JulyThe Fed, inflation and interest ratesLet's say we see inflation rising

How long will it last

That's the question that puzzles the monetary policymakers at the Federal Reserve. "The effects on inflation could be short d, reflecting a one-time shift in the price level," the Fed's chair, Jerome Powell, said June 24 in prepared testimony before Congress. "It is also possible that the inflationary effects could instead be more persistent. "It matters whether inflation will take one step upward and stop, or keep climbing

The answer will affect mortgage rates

Powell told Congress that he's inclined to "wait to learn more the ly course of the economy" before deciding when to cut short-term interest rates

The Fed's monetary policy committee meets July 29-30, and Powell was hinting that he leans toward keeping the federal funds rate where it is, and possibly cutting it at the Sept. 16-17 meeting

But not everyone at the Fed agrees

Fed Governor Michelle Bowman said in a speech on June 23 that the Fed should seriously consider cutting the federal funds rate in July if "inflation pressures remain contained. "Disagreement over the timing of the next Fed rate cut will spill into the news all month

If become convinced that a rate cut will happen in July, mortgage rates could fall

As of late June, though, most believed a September cut was more ly

If that perception continues, then mortgage rates might fall, but more slowly

What other forecasters predictThe Mortgage Bankers Association predicts that mortgage rates won't change much over the next three months

The trade association forecasts that the 30-year mortgage will average 6. 8% from July through September, the same as the average from April through June

Mortgage securitizer Fannie Mae expects mortgage rates to drop in the third quarter, averaging 6

Both organizations predict mortgage rates to decline gradually through the first half of 2026

What I predicted for June, and what happenedAt the end of May, I wrote: "Mortgage rates may keep climbing in June, continuing an unsteady upward march that began after higher tariffs were announced in April. " That … didn't happen

Instead, mortgage rates inched a little lower in June

It wasn't much of a decline, but rates did fall gradually

Thank the drop in rates to something that didn't happen: Inflation didn't pop up a seemingly dead monster in a horror movie

The core consumer price index rose 2. 8% year-over-year in May, the Bureau of Labor Statistics reported June 11

It was the same inflation reading as in April, and an indication that tariffs had not yet pushed overall prices higher

The authorHolden LewisHolden is NerdWallet's authority on mortgages and real estate

He has reported on mortgages since 2001, winning multiple awards