Where are mortgage rates headed?

The Federal Reserve has maintained stable interest rates throughout the first half of 2025, while raising its end-of-year projections for inflation and unemployment and lowering its forecast for economic growth. This careful strategy has led homeowners and analysts to speculate about potential borrowing relief while the outlook for summer mortgage rates still remains uncertain during this typically busier time of year for house hunting.

Possibility one: Rates hold steady
"At this point, I think the most likely scenario this summer is that mortgage rates will remain relatively stable, hovering near current levels," said Michael Merritt, mortgage servicing operations manager for BOK Financial®. "Economic uncertainty continues to weigh heavily on the market, and the Federal Reserve has been cautious about cutting rates too quickly, aiming to avoid reigniting inflationary pressures."

Merritt added that the 10-year Treasury yield, which heavily influences mortgage rates, has remained elevated due to this uncertainty. As a result, he expects mortgage rates to stay in the mid- to high-6% range through the summer.

Chris Maloney, mortgage strategist for BOK Financial Capital Markets, added, "If the current July 9 tariff deadline were extended deeper into the year, it would put investor concerns on hold and keep sentiment similar to what we see now. At the same time, inflation needs to trend toward the Fed's 2% target to keep investors' hope for more Federal Reserve rate cuts alive."

Possibility two: Rates decline
The most welcome scenario for homebuyers might be that mortgage rates decline. However, keep in mind that, if it occurs because the economy is rapidly slowing, that would have its own negative consequences.

"For mortgage rates to drop meaningfully this summer, we'd likely need to see a clear economic slowdown, something that signals to the Fed that growth is stalling or inflation is cooling faster than expected," said Merritt. "In that case, the Fed might move to cut rates to support the economy."

A Fed rate cut typically brings down the 10-year Treasury, which is closely tied to mortgage rates. "If that happens, we could see mortgage rates start to ease. But without that kind of shift in the data, rates are probably going to stay where they are," he said.

Maloney added that if the tariff war was put to bed and inflation dropped enough to hit the Federal Reserve's 2% target, that also would be enough to swing sentiment toward a lower rate environment. "Couple this with a continued robust labor market and-if not a balanced budget, a more realistic federal budget proposal-and investors would cheer and boost demand for bonds, agency mortgage-backed securities included," Maloney said.

Possibility three: Rates increase
Alternatively, for mortgage rates to move higher this summer, we'd likely need to see a resurgence in inflation paired with continued strength in the broader economy, Merritt said. That combination, like what we saw in parts of 2024 and earlier this year, would put pressure on the Federal Reserve to hold off on rate cuts or even consider additional hikes, he added.

“If the Fed signals a more aggressive stance to combat inflation, that could push the 10-year Treasury yield higher, which in turn, would drive mortgage rates up,” he said.

“So, strong economic data plus sticky inflation is the formula for upward pressure on rates.”

- Michael Merritt, mortgage servicing operations manager for BOK Financial

The factors at play
Merritt thinks one of the most significant key indicators is the 10-year Treasury yield, but that figure doesn’t operate in a vacuum, he noted.

"The 10-year yield and the Fed's decisions are both shaped by broader economic data," he explained. "I'm paying close attention to inflation reports, unemployment and job growth, gross domestic product (GDP) growth, consumer sentiment and spending," he said. "All these factors interact, so it's less about one single number and more about the overall direction in which they point. That's what ultimately moves the bond market and, by extension, mortgage rates."