30-Year Mortgage Rates Near One-Month High
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The Federal Reserve’s actions,especially its adjustments to the federal funds rate,are a cornerstone of economic policy. While the connection between the federal funds rate and mortgage rates isn’t always a direct one-to-one correlation, the Fed’s monetary policy substantially shapes the landscape of borrowing costs for homeowners. Understanding this dynamic is crucial for anyone looking to buy a home or refinance an existing mortgage.
The Fed Funds Rate: A Key Lever in Monetary Policy
the federal funds rate is the target interest rate set by the Federal Open Market Committee (FOMC) for overnight lending between banks. This benchmark rate influences a wide array of other interest rates throughout the economy,including those for auto loans,credit cards,and,importantly,mortgages.
How the fed Funds Rate Impacts Mortgage Rates
While the fed funds rate can influence mortgage rates, it doesn’t do so directly. In fact, the fed funds rate and mortgage rates can sometimes move in opposite directions. However, given the historic speed and magnitude of the Fed’s 2022 and 2023 rate increases-raising the benchmark rate 5.25 percentage points over 16 months-mortgage rates surged during this period, reflecting the ripple effects of the Fed’s dramatic campaign.
The Fed maintained the federal funds rate at its peak level for almost 14 months, beginning in July 2023. But last September,the central bank announced a first rate cut of 0.50 percentage points, and then followed that with quarter-point reductions in November and December.
So far this year,the Fed has held rates steady through five meetings,with a first 2025 reduction not expected until September at the earliest. The Fed’s quarterly forecast released in mid-June indicated a median prediction of two quarter-point rate cuts by the end of the year, with the Fed’s next quarterly forecast scheduled for Sept. 17.
How We Track Mortgage Rates
The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680-739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2025. Use is subject to the Zillow Terms of Use.