Here’s how far mortgage rates have dropped in 2025 (and how much further they can still fall)

If you’ve been a homebuyer or homeowner hoping to refinance in the past few years, it’s understandable if you’ve stopped monitoring mortgage interest rates. 

After declining to near record lows at the start of the decade, rates here rose exponentially after 2022, thanks to a surge in inflation. The Federal Reserve responded by raising interest rates and, soon, mortgage rates rose, too. They jumped so high, in fact, that at one point in 2023 they were sitting at their highest level since 2000. This put homebuying and refinancing out of reach for all but a few select buyers and owners and essentially eliminated the need to monitor the mortgage rate climate.

But the economy is changing again. And, while not quite as affordable as they were in 2020 and 2021, mortgage rates are declining again. There’s also a strong chance that they could fall further, perhaps as soon as this September. Understanding this dynamic, then, it helps to take a step back to see how far mortgage rates have actually dropped in 2025. For both buyers and owners, it can also be helpful to determine how much further they could still fall. Below, we’ll break down what to know right now.

Start by seeing how low a mortgage rate you’d currently qualify for here.

Here’s how far mortgage rates have dropped in 2025

Mortgage interest rates have been on a slow but not insignificant decline since January. During the week of January 6, 2025, the average rate on a 30-year fixed-rate mortgage was 7.04% and 6.27% for a 15-year one, according to data from FreddieMac. Both, however, are noticeably lower now. 

The weekly average for the week of September 4, for example, saw rates on the 30-year term at 6.50% and they were just 5.60% for 15-year terms. That’s more than a half percentage point for the longer mortgage terms and almost three quarters of a point lower for 15-year terms. While that may not seem like a major change on paper, it does result in a lower monthly mortgage payment and, potentially, thousands of dollars saved over the life of the loan.

More importantly, however, it shows a steady decline in costs associated with what will likely be the most expensive purchase owners will ever make. The trend here is an encouraging one, even if rates aren’t as low as they were a few years ago and even if there’s still work to be done to get them consistently below 6% again. 

And with the possibility of mortgage points, which buyers can purchase to lock in lower rates, and the reality of adjustable rate mortgages being more attractive in today’s rate environment, the reality is that there are still affordable ways to purchase a home now. It just may not be quite as cheap or as simple as it once was.

Learn more about the ways you could lock in a below-average mortgage rate here.

How much further can mortgage rates fall?

How much further mortgage rates can decline, both short- and long-term, however, remains the critical question. So much depends on the Fed’s policy, which will be dictated by a mix of unemployment news, domestic economic policy and the ongoing fight against inflation. The 10-year Treasury yield will also impact mortgage rates, and a decline there will result in lower mortgage rates. 

For context, mortgage rates plunged to a two-year low in September 2024, right before the Fed announced a larger-than-anticipated 50 basis point reduction. But September 2025’s cut is widely anticipated to be just 25 basis points, muting the potential impact that could be felt on the mortgage rate market. 

That said, there’s still the potential for mortgage rates to decline in the months that follow and into 2026, assuming additional Fed rate cuts are issued and that treasury rates continue to cool. How much further they drop, however, is unknown, although its likely to be a gradual decline, felt incrementally, versus any major overnight cuts.

It took time for mortgage rates to get as high as they were, and it will take the same or longer for them to drop lower. The good news, however, is that they’re on the right (downward) trajectory, giving buyers and owners cause for optimism.

The bottom line

Mortgage interest rates are already down by around half a percentage point or more, now, compared to where they were at the start of 2025. And current market indications appear to show a further cooling in the months to come, should conditions continue. But it’s also important to remember that the lowest rates and best terms will be reserved for those buyers and owners with the highest credit scores. So, whether you’re ready to take action now or considering a move soon, be sure to first spend the time to improve your credit to better position yourself for the most attractive offers.