Mortgage Rates Slip Below 6.5% as US Housing Starts Hit Five-Year Low

Key Takeaways

• Mortgage rates slipped below 6.5% this week as Treasury yields eased amid optimism surrounding a potential US-Iran peace agreement
• US housing starts fell 15.4% in May to an annualized rate of 1.18 million units, the lowest level since May 2020
• Multifamily construction plunged 40.2%, while single-family starts dropped to their weakest level since September 2025

Mortgage rates moved lower this week after Treasury yields eased. This brought the average 30-year fixed rate below 6.5%. The decline comes after signs of progress toward a potential agreement between the US and Iran. This helped calm some inflation concerns tied to energy markets. At the same time, new housing data points to a slower pace of construction activity, with builders pulling back despite slightly lower borrowing costs.

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Mortgage Rates Move Lower as Treasury Yields Retreat

The average 30-year fixed mortgage rate fell to 6.47% this week from 6.52% a week earlier. Mortgage rates today have seen a decline in Treasury yields after investors reacted to developments in the Middle East. This week, President Donald Trump signed a preliminary agreement aimed at ending the conflict with Iran and opening a 60-day negotiation period toward a broader deal.

Lower oil prices could ease inflation pressures. This is a factor that is closely watched by bond markets. Since mortgage rates tend to move along with Treasury yields, borrowing costs for homebuyers have become lower as well.

Even after the recent decline, the average 30-year mortgage rate remains well above the record low of 2.65% reached in January 2021. Homebuyer affordability continues to be a challenge across much of the housing market.

Federal Reserve policy remains another factor. While the Fed does not directly set mortgage rates, expectations around future interest-rate decisions often influence long-term borrowing costs.

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Housing Starts Fall to Lowest Level Since May 2020

Housing markets moved in the opposite direction in May. According to data from the US Census Bureau and the Department of Housing and Urban Development, US housing starts fell 15.4% to a seasonally adjusted annual rate of 1.177 million units. This marked the lowest reading since May 2020.

The decline was driven largely by multifamily projects. Residential construction for buildings with five units or more fell to an annual pace of 284,000 units. Single-family housing starts also slipped 1.9% to 882,000 units. This is their lowest level since September 2025.

The figures suggest that lower mortgage rates have yet to translate into stronger homebuilding activity. Financing costs remain high compared with recent years. Meanwhile, affordability pressures continue to weigh on both builders and prospective buyers.

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