Mortgage rate update for October 22, 2025: Rates continue to be low

Current mortgage rates data:

Optimal Blue's most recent data, reviewed by Coins2Day on Oct. 21, shows home loans locked in as of Oct. 20. 

What's the current situation with mortgage rates in the market?

It's hardly an exaggeration if 30-year mortgage rates have seemed stuck around 7% for an extended period. Many anticipated a drop in rates once the Federal Reserve began lowering the federal funds rate last year, but this did not materialize. A brief dip occurred before the Fed's September 2024 session, only for rates to rebound swiftly thereafter.

Indeed, by January 2025 the average rate on a 30-year, fixed-rate mortgage surpassed 7% for the first time since last May, as reported by Freddie Mac data. That’s jarringly high compared to the historic average low of 2.65% recorded in January 2021, when the government was still working to stimulate the economy and avert a pandemic-induced economic slump.

Barring another major crisis, professionals concur that mortgage rates won't return to the 2% to 3% bracket within our lifetimes. Furthermore, given President Donald Trump's pursuit of policies such as tariffs and deportations, certain analysts have expressed concern that the job market might shrink and inflation could rebound.

Amidst this situation, American house hunters have consistently struggled with elevated mortgage interest rates; however, certain individuals might discover methods to reduce their acquisition costs, like arranging for rate reductions with a developer when buying a brand-new residence. Homebuyers ultimately experienced more significant reprieve during the latter part of August and the beginning of September in 2025, as mortgage rates began to show a clear downward trend leading up to the Federal Reserve's scheduled meeting on September 16-17.

As expected, the Fed delivered a rate cut of a quarter percentage point to the federal funds rate. There are also two more Fed meetings on the calendar for this year, so additional cuts are possible.

Securing the most favorable mortgage rate available

Although economic circumstances are outside your influence, your financial standing as a borrower significantly affects the mortgage rate you receive. Considering this, strive to accomplish the following:

• Ensure your credit is in excellent condition. Generally, a conventional mortgage requires a minimum credit score of 620. FHA loans might allow you to qualify with a score of 580, or even 500 if you make a 10% down payment. Nevertheless, to secure a low interest rate that could save you tens or hundreds of thousands of dollars on your loan over time, you'll need a significantly better score. For example, Blue Water Mortgage indicates that a score of 740 or above is regarded as excellent.
• Maintain a low debt-to-income (DTI) ratio. You can calculate your DTI by dividing your monthly debt payments by your gross monthly income, then multiplying by 100. For example, someone with a $3,000 monthly income and $750 in monthly debt payments has a 25% DTI. When applying for a mortgage, it’s typically best to have a DTI of 36% or below, though you may be approved with a DTI as high as 43%.
• Get prequalified with multiple lenders. Consider trying a mix of large banks, local credit unions, and online lenders and comparing offers. Additionally, connecting with loan officers at several different institutions can help you evaluate what you’re looking for in a lender and which one will best meet your needs. Just ensure that when you’re comparing rates, you’re doing so on common ground—if one estimate involves purchasing mortgage discount points and another doesn’t, it’s important to recognize there’s an upfront cost for buying down your rate with points.

Historical chart of mortgage interest rates

A key factor in understanding the conversation about elevated mortgage rates is that current rates near 7% seem high due to the recent memory of rates between 2% and 3%. Such low rates were a result of governmental measures intended to avert a recession while the nation confronted the extraordinary challenges of the coronavirus pandemic.

Experts concur that under more typical economic circumstances, we probably won't witness such remarkably low interest rates again. Historically, rates around 7% are not considered exceptionally high.

According to a St. Louis Fed (FRED) chart that uses Freddie Mac data, the average 30-year fixed-rate mortgage saw rates that were generally typical from the 1970s to the 1990s, except for a notable surge in the early 1980s. Specifically, mortgage interest rates surpassed 18% in September, October, and November of 1981.

However, this historical view provides scant comfort to property owners who might wish to relocate but are constrained by an unprecedentedly low interest rate. The prevalence of such circumstances in today's real estate environment, where homeowners are prevented from moving due to pandemic-era rates that they wouldn't otherwise have, has come to be recognized as the “golden handcuffs.”

Elements influencing mortgage interest rates

The U.S. Economy's condition is likely the primary factor influencing mortgage rates. Should lenders anticipate inflation's approach, they'll probably increase rates to safeguard their profitability. 

A significant concern in the broader context is the nation's debt. When the government must secure loans to finance its expenditures, this tends to drive interest rates higher.

Home loan demand also matters. When mortgage applications are few, lenders may reduce rates to attract more customers. Conversely, if loans are highly sought after, they might increase interest rates to offset their expenses.

And, the Federal Reserve’s decisions play a role too. The Fed can impact mortgage rates by changing the federal funds rate and by how it manages its balance sheet. The federal funds rate probably gets the most attention between these two. When it changes, mortgage rates often follow. But remember, the Fed doesn’t set mortgage rates directly, and they don’t always move exactly with the fed funds rate.

The Federal Reserve impacts long-term financial product interest rates via its balance sheet. During economic downturns, it may purchase assets such as mortgage-backed securities (MBS) to stimulate the economy. However, the Fed has recently been reducing its balance sheet, failing to replace maturing assets. This action generally leads to higher rates. Therefore, while Fed rate decisions capture everyone's attention, its balance sheet activities could be a more significant factor for your mortgage rate.

The significance of comparing mortgage interest rates

Shopping around with different lenders and comparing rates across various loan types are essential actions to secure the most suitable mortgage for your specific needs.

If your credit is excellent, opting for a conventional mortgage might be a great choice for you. However, if your score is below 600, an FHA loan may provide an opportunity that a conventional loan would not.

Investigating your choices among various banks, credit unions, and online lenders can substantially impact your annual expenses. Freddie Mac's studies suggest that during periods of elevated interest rates, prospective homeowners could potentially reduce their yearly outlays by $600 to $1,200 by seeking mortgages from several different lenders.