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Mortgage rates continue to trend down, sparking interest in refinancing but not doing much to get homebuyers off the fence last week, according to a weekly survey of lenders by the Mortgage Bankers Association.
The MBA’s Weekly Mortgage Applications Survey showed applications to refinance were up 7 percent last week compared to the week before, and 40 percent from a year ago.
Demand for purchase loans was essentially unchanged from the week before, but up 16 percent from a year ago.
Joel Kan
Requests to refinance accounted for 40 percent of all mortgage applications, “as overall uncertainty continues to hold homebuyers out of the market,” MBA Deputy Chief Economist Joel Kan said in a statement.
At 6.64 percent Tuesday, rates on 30-year fixed-rate mortgages are down 28 basis points since May 21 and 41 basis points from a 2025 high of 7.05 percent registered on Jan. 14, according to rate lock data tracked by Optimal Blue.
Mortgage rates trending down
But there’s no telling if the downward trend in mortgage rates is sustainable, economists say. Hopes that home sales will pick up could depend on additional inventory coming onto the market, which could cool or reverse home price gains.
MBA economists are forecasting that rates on 30-year fixed-rate loans will end the year about where they are now, while Fannie Mae predicts rates will drop to 6.5 percent by Q4 2025 and to 6.1 percent by the end of next year.
Federal Reserve policymakers have signalled that they expect to cut short-term interest rates twice later this year to keep unemployment in check. They’ve been holding off on taking action until they see whether the Trump administration’s policies in areas including tariffs, immigration, taxes and regulation impact inflation.
Ongoing tariff negotiations have added to the uncertainty, with a 90-day pause on country-specific “reciprocal tariffs” set to expire on July 9.
With consumers already paying baseline tariffs of 10 percent on about 35 percent of all imports and even higher rates on some other goods, the average effective tariff rate on imports is currently 15.8 percent — the highest since 1936, according to a June 17 analysis by The Budget Lab at Yale.
If the Trump administration follows through on threats to raise tariffs on imports from the European Union to 50 percent, to 35 percent on imports to Japan, and to 25 percent on other countries, the average effective tariff rate will rise by 6 percentage points, economists at Pantheon Macroeconomics said in their July 3 U.S. Economic Monitor report.
That would boost the impact of tariffs on consumer prices to 1.5 percent, up from 1 percent today, Pantheon forecasts.
“In the end, however, we expect any ratcheting-up of the tariffs to be short-lived,” Pantheon economists Samuel Tombs and Oliver Allen wrote. “Other countries will respond forcefully; they all saw Mr. Trump fold to pressure from China in May.”
Inflation moved away from Fed’s target in May
The latest reading of the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index, shows consumer spending shrank by $29.3 billion in May, and that the annual rate of inflation moved away from the Fed’s 2 percent goal, to 2.3 percent.
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