Mortgage Interest Rates Today: Mortgage Rates Spike After U.S. Loses Its Top Credit Rating

Mortgage rates climbed on Thursday on the heels of the latest U.S. credit downgrade, which pushed the 10-year Treasury yields higher this week—as President Donald Trump‘s “big, beautiful” spending bill just squeaked by in the House.     

The average rate on 30-year fixed home loans increased to 6.86% for the week ending May 22, up from 6.81% last week, according to Freddie Mac. Rates averaged 6.94% during the same period in 2024.

“Mortgage rates inched up this week but continue to remain lower than one year ago,” says Sam Khater, Freddie Mac’s chief economist. “With more inventory for buyers to choose from than the last few years, purchase application activity continues to hold up.”

The credit rating agency Moody’s on Friday downgraded the U.S. credit rating from the gold-standard AAA status to AA1, citing mounting concerns over the federal government’s ballooning debt, currently topping $36 trillion.  

Moody’s decision, coupled with lingering doubts concerning Trump’s tariff policies, raised questions about whether U.S. Treasury remains a safe haven for investor dollars. 

As a result, yields climbed as investors reassessed the risk of holding U.S. debt, according to Realtor.com® economist Jiayi Xu. Because mortgage rates typically mirror the 10-year yield’s trajectory, this upward movement translated into higher borrowing costs for homebuyers. 

And this trend is projected to continue, after the Republican-controlled U.S. House on Thursday passed Trump’s “big, beautiful” tax-cut bill, sending yields rising even higher on the expectation that it will add roughly $3.8 trillion to the national debt, according to the nonpartisan Congressional Budget Office.       

“High mortgage rates continue to pose a significant challenge for homebuyers. The ‘lock-in effect’—where current homeowners are reluctant to sell and give up their lower mortgage rates—has led many to postpone listing their homes,” says Xu. 

The good news for prospective buyers is that they have more for-sale homes to choose from compared with a year ago—although still significantly fewer than in the pre-pandemic years. 

The bad news is that mortgage rates stuck in the high 6% range and rising home prices are pricing many people out of the housing market.

According to a recent Realtor.com survey, nearly 2 in 5 homebuyers cited budget constraints as a major barrier to homeownership.

On a more positive note, says Xu, for those who are moving forward with their home search, today’s slower-paced housing market might feel less stressful. Increased inventory, relatively stable prices, and longer days on the market are making it less likely that a potential buyer would have to endure a bidding war. 

Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health. They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends, like economic growth and inflation expectations. Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.

So when the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to go up. Conversely, when Treasury yields decrease, mortgage rates fall.

The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account. Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk. Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.

Mortgage applications dipped by 2% from a week ago, according to the latest data from the Mortgage Bankers Association’s Weekly Mortgage Application survey ending on March 21. 

During the same period, purchase applications, involving the offer and agreement to buy a property, increased 1% from a week ago and 7% year over year, driven by a surge in FHA loan applications, according to Joel Kan, MBA’s vice president and deputy chief economist. 

Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you’ll receive. The higher the credit score, the lower the interest rate you’ll qualify for.

The credit score you need will vary depending on the type of loan. A score of 620 is a “fair” rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.

Different types of mortgage loan programs have their own minimum credit score requirements. Some lenders have stricter criteria when evaluating whether to approve a loan. They want to make sure you’re able to pay back the loan.

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