What happened?

As widely anticipated, the Federal Reserve kept the fed funds rate unchanged in its July Federal Open Market Committee (FOMC) meeting. Chairman Jerome Powell said the decision is appropriate because while labor demand has weakened, so has labor supply, which keeps unemployment in balance. While the direct impact on mortgage rates remains uncertain, Treasury yields rose in response to Powell’s comments.

Where will mortgage rates go from here?

Zillow forecasts mortgage rates will remain near the mid-6% range through the end of 2025. Mortgage rates continue to fluctuate with daily economic news, yet they’ve remained largely confined within the 6%-7% range over the past year. This persistent range reflects an ongoing tug of war: signals of a gradually cooling economy put downward pressure on rates, while stubborn inflation keeps them elevated. 

What does that mean for the housing market? 

Expect the housing market to remain stuck. Even if mortgage rates edge slightly lower by late 2025, it won’t significantly alleviate affordability pressures faced by the typical household. Zillow’s analysis indicates mortgage rates would need to fall substantially—to the mid-4% range—to restore affordability for buyers earning the median income, an unlikely scenario in the near future.

With some buyers priced out, and sellers continuing to list their homes, inventory has accumulated to the highest levels since November 2019. Though prices remain high, the buyers still in the market find themselves with more options and more negotiating power. Aside from offering concessions like covering closing costs, sellers are cutting prices to entice affordability-challenged buyers. The share of listings with a price cut reached 26.6% in June, the highest share for any June in Zillow records dating back through 2018.