Mortgage Rates Update: July 3rd, 2025

In this week's market pulse, economist Bill Knudson highlights a meaningful drop in mortgage rates, set against a backdrop of rising Treasury yields. His analysis underscores a rare divergence—one that hints at evolving lender behavior and macro sentiment.

---

For a $100,000 loan at 6.84%, the monthly payment is $655

Upcoming releases:

• The next new jobs report is August 1

  
  

• The next CPI release is July 15

• The next Fed meeting is June 30

Mortgage Rates Update: July 3rd, 2025

---

Key Insights:

• Notable Rate Decline:The 30-year fixed mortgage rate dropped 10 basis points (bp), falling from 6.77% to 6.67%. For a $100,000 loan, this lowered the monthly payment by $7 to $643.

• Loan Affordability Snapshot at 6.67%:

  • Monthly interest: $389

  • Interest share of payment: 60%

  • Income needed to qualify: $27,570

  • Income multiplier: 3.6x

• Spread and Market Signal:

  • The spread between the 10-Year Treasury (4.35%) and mortgage rate narrowed to 232bp, but remains 64bp above the historical norm of 168bp.

  • Treasury rates increased while mortgage rates fell, tightening the spread and suggesting improved lender confidence or competitive pricing.

• Broader Economic Context:

  • CPI remains at 2.4%

  • The Prime Rate holds steady at 7.50%

Knudson interprets this spread narrowing as a possible turning point in lender behavior—signaling increased comfort with rate risk or growing demand-side momentum. For borrowers, it marks a window of slightly improved affordability. For institutions, it’s a reminder to stay vigilant as market forces begin to shift.