What happened to mortgage rates this week
The Freddie Mac 30-year mortgage rate dropped 4 basis points, to 6.85%, this week, mirroring the trend in 10-year Treasury yields. When the Federal Reserve began its first rate cut in September 2024, people expected a corresponding drop in mortgage rates. However, the ongoing uncertainty around government trade, economic, and fiscal policy has kept rates elevated.
Looking ahead, we do not anticipate a rate cut at the upcoming June FOMC meeting, as the U.S. economy continues to perform well: Inflation is gradually moving toward the Fed’s 2% target, and the labor market remains healthy. But the real focus might fall on the release of updated economic projections and Fed Chair Jerome Powell’s postmeeting remarks, which could shed light on how the Fed is weighing growing uncertainties—especially with the tariff pause nearing its end. These insights might offer a clearer sense of the Fed’s policy trajectory beyond the June decision.
What it means for the housing market
The stubbornly high mortgage rates continue to weigh heavily on both buyer and seller activity during what’s typically a busy season. Despite growing inventory and slower home sales, affordability remains a key challenge. More sellers are cutting prices, but high rates and elevated prices mean the income needed to buy a home is still well above pre-pandemic levels. In May 2025, a household needed an annual income of $91,960 to afford a typical home with a 20% down payment—$42,680 more than in May 2019, an 86.6% increase. This sharp rise reflects both the jump in mortgage rates—from 4.07% in May 2019 to 6.82% in May 2025—and a 37.5% increase in median list prices over the same period.