Borrowing costs had climbed earlier in 2026 because of the Middle East conflict, which pushed up energy prices and inflation. That held back the housing market during the spring selling season. Now mortgage rates have fallen to their lowest point since mid-May. But lower rates alone are not the whole story - sellers are cutting prices, and buyers are signing more contracts.
The average interest rate on a 30-year fixed mortgage fell to 6.43%, down from 6.49% the previous week. That is the lowest reading since mid-May, according to the weekly survey from Freddie Mac. Freddie Mac stock stood at 5.68, up 3.24% on the day.
The drop comes after a period of higher borrowing costs. Since late May, rates have stayed near 6.5%, giving buyers and sellers some stability.
The spring selling season typically sees heightened activity, but this year it was subdued as borrowing costs remained elevated. The Middle East conflict caused energy prices to spike, feeding into inflation and forcing the Federal Reserve to maintain a hawkish stance. Now, with rate cuts expected and economic data softening, mortgage rates have eased, offering a window of opportunity for buyers and sellers alike.
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The housing market is showing signs of life. In June, national listing prices fell by 2.5% year-over-year, a record drop in the dataset that stretches back to 2017, as reported by Realtor.com.
According to Realtor.com, signed contracts for home purchases climbed to 3.7% in June. The firm's chief economist Danielle Hale said: "Sellers are reading market conditions and are pricing accordingly from the start rather than listing high and cutting later, and buyers are taking note and making bids."
The drop in mortgage rates is tied to a bigger story. Thursday's weaker-than-expected US jobs report lifted stock prices and pushed bond yields lower, as investors bet that the Federal Reserve would not need to hike interest rates in the near future.
The recent decline in mortgage rates follows a turbulent period for the housing market. Earlier in 2026, borrowing costs climbed as the Middle East conflict drove up energy prices and fueled inflation, dampening home sales during the crucial spring season. With rates now easing, both buyers and sellers are adjusting their strategies.
Sellers who held off listing during the spring are now entering the market with more realistic price tags, while buyers who were sidelined by high rates are finding renewed affordability. The combination of lower borrowing costs and price cuts is gradually thawing a market that had been frozen by uncertainty.
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