Mortgage Rates Update: July 31st, 2025

In this week’s report, economist Bill Knudson highlights a modest but meaningful decline in mortgage rates. While the movement appears small on the surface, the widening spread between mortgage rates and Treasury yields signals continued caution in lending markets.

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For a $100,000 loan at 6.74%, the monthly payment is $648

Upcoming releases:

• The next new jobs report is Sept 5 - August 1 new jobs came it 73,000 and unemployment rate increased from 4.1% to 4.2%

  
  

• The next CPI release is Aug 12. 

• The next Fed meeting is September 17

Mortgage Rates Update: July 31st, 2025

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Key Takeaways:

• Mortgage Rate Decrease:The average 30-year fixed mortgage rate dropped by 2 basis points (bp), from 6.74% to 6.72%. On a $100,000 loan, the monthly payment decreased by $1, now totaling $647.

• Affordability Breakdown at 6.72%:

  • Monthly interest: $392

  • Amortization: $87

  • Qualifying income: $27,712

  • Income multiplier: 3.6x

• Spread Expansion Signals Caution:

  • 10-Year Treasury yield fell by 6bp to 4.37%

  • Mortgage-Treasury spread increased to 235bp, 67bp above the historical average of 168bp

  • Lenders are maintaining a wide “safety cushion,” despite falling Treasury rates

• Contextual Factors:

  • CPI remains elevated at 2.7%

  • Prime rate holds at 7.50%; Fed policy and labor data remain key market drivers

Knudson views the rate dip as a window of relative affordability for borrowers. Yet with spreads still well above historical norms, the message from lenders is clear: risk remains priced in. As the Fed meeting and jobs data loom, volatility may return quickly.