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Declining mortgage rates and a surge in for-sale listings had homebuyers scrambling to apply for mortgages last week at the fastest pace in more than two years, according to a weekly survey of lenders by the Mortgage Bankers Association.
But mortgage rates are on the rebound again as investors who fund most home loans weigh how a strong June jobs report and the Trump administration’s threats to impose new tariffs in August might affect Federal Reserve policymakers’ willingness to cut rates.
Applications for purchase loans were up by a seasonally adjusted 9 percent last week when compared to the week before, and 25 percent from a year ago, the MBA’s Weekly Mortgage Applications Survey showed.
“Mortgage rates moved lower last week, with the 30-year fixed rate decreasing to 6.77 percent, its lowest level in three months,” MBA Deputy Chief Economist Joel Kan said, in a statement.
After adjusting for the July 4th holiday, demand for purchase loans came in at the strongest pace since February 2023.
“Homebuyer demand is being fueled by increasing housing inventory and moderating home-price growth,” Kan said. “The average loan size on a purchase application, at $432,600, was at its lowest since January 2025.”
Active listing inventory was up 28.1 percent in June to a post-pandemic high, according to Realtor.com, and home prices have come down by at least a full percentage point in nearly one-third of the 100 largest U.S. housing markets tracked by ICE Mortgage Technology.
After spiking in April following President Trump’s “liberation day” tariff announcement, mortgage rates were trending down during June on hopes that trade negotiations would forestall implementation of additional “reciprocal tariffs.”
Mortgage rates on the rebound
Rates for 30-year fixed-rate mortgage came down from 6.92 percent on May 21 to 6.64 percent on July 1 — a drop of nearly 30 basis points, according to rate lock data tracked by Optimal Blue.
Although the Trump administration pushed back plans to impose reciprocal tariffs on July 9, mortgage rates are on the rise again as the White House sends warning letters to countries that will face higher tariffs on Aug. 1 if they don’t make trade deals.
Nearly two dozen countries including Japan, South Korea, Indonesia, Thailand and Cambodia have received letters from the Trump administration so far, the Associated Press reported.
At 6.74 percent Tuesday, rates on 30-year fixed-rate mortgages are up 10 basis points from July 1. A basis point is one hundredth of a percentage point.
Tariffs are a concern to investors who buy mortgage-backed securities that fund most home loans because of their potential to be passed on to consumers in the form of higher prices, rekindling inflation.
The Trump administration has been pressuring the Federal Reserve to lower short-term interest rates, and demanded that Fed Chair Jerome Powell resign.
But after cutting short-term interest rates by a full percentage point at the end of last year only to see mortgage rates go up, Fed policymakers have said they’re waiting to see how the Trump administration’s tariff policies shake out, and what impact they have on the economy.
At 15.8 percent, the effective rate of all tariffs already in place is the highest since 1936, and will push prices up by 1.5 percent, according to a June 17 analysis by The Budget Lab at Yale.
Job growth and unemployment
The Fed is wrestling with its dual mandate to maximize employment while keeping inflation in check.
According to the latest numbers from the Bureau of Labor Statistics, the U.S. economy added 147,000 jobs in June — 37,000 more jobs than forecasters had expected.
Job growth cooling
The July 3 report pushed mortgage rates and yields on government bonds up, as it gave Fed policymakers more leeway to wait until September to lower short-term interest rates.
There are even doubts about a September rate cut. The CME FedWatch Tool, which tracks futures markets to predict the probability of future Fed moves, on Wednesday put the odds of a September rate cut at 71 percent, down from 94 percent on July 2.
But in the long term, job growth is cooling, and forecasters at Pantheon Macroeconomics are calling the recent rise in rates “nonsensical.”
Much of June’s job growth, they say, was due to an artificial construct of seasonal adjustments that calls into doubt estimates that state and local government jobs grew by 80,000 last month, including 64,000 education jobs.
With downward revisions of monthly job growth from initial estimates averaging 29,000 since January 2023, “underlying job growth probably was close to zero,” Pantheon forecasters said in their July 7 U.S. Economic Monitor.
Unemployment trending up
Pantheon forecasters expects the unemployment rate to rise from 4.1 percent in June to about 4.75 percent in Q4, which they think would motivate the Fed to cut short term rates by a total of 75 basis points at its final three meetings of the year.
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