Buyers should keep an eye on the possibility of rate cuts in the next few months. Tharon Green/CNET
Mortgage rates are holding near a two-month low, with average 30-year fixed rates having fallen just below 6.7%, according to Bankrate data. After weeks of hovering close to 7%, it's a positive sign in today's unaffordable housing market. But it's unclear how much staying power the recent decline will have.
Thursday's Bureau of Labor Statistics job report showed slightly lower unemployment in June (4.1% compared to 4.2% in May) than economists expected. Because stronger economic data typically is bad news for mortgage rates, prospective buyers could expect slightly higher rates in the coming days.
Overall, experts say rates are likely to stay above 6.5% throughout 2025. Ongoing economic uncertainty caused by the Trump administration's trade measures, deficit spending and geopolitical maneuvering has kept bond yields elevated and Federal Reserve interest rate cuts on hold.
Mortgage interest rates are closely tied to the 10-year Treasury. Bond market investors drive yields (rates) higher or lower based on their expectations for inflation, unemployment, Fed policy decisions and government debt.
Lower unemployment makes it less likely that the central bank will reduce borrowing costs this summer. But despite Thursday's stronger-than-expected reading, other recent data point to a clear cooling off in the labor market: Hiring has sharply slowed and jobless claims are on the rise.
For now, market watchers are still eyeing September for a Fed reduction. But that still won't be a magic cure for the housing market. Mortgage rates would need to fall substantially from current levels to encourage homebuying demand, said Beth Ann Bovino, chief economist at U.S. Bank.
CNET
Do Fed rate cuts equal lower mortgage rates?
The central bank is responsible for ensuring full employment and controlling inflation, mainly by setting short-term interest rates for banks. Though the Fed's policy changes have a ripple effect on all borrowing rates, the central bank doesn't directly set the rates on home loans.
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