Mortgage rates are decreasing the most in these states, data shows

The average mortgage interest rate decreased across all states from Q1 2025 to Q2 2025, and a new study is revealing where interest rates are decreasing most.

While the average mortgage interest rate has stayed above 6% on 30-year fixed mortgages during 2025, the rate varies widely by state.

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In order to highlight the states where homeowners’ financial burdens are getting lighter, WalletHub compared the 50 states based on its proprietary user data on mortgage interest rates from Q1 2025 to Q2 2025.

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Alabama had largest decrease in mortgage rate 

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By the numbers:

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According to the data, Alabama had the largest decrease in the average mortgage interest rate between Q1 2025 and Q2 2025, at around 16.7%.

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With this significant decrease, the average mortgage rate in Alabama dropped to only 4.8% in Q2 2025, making it the 10th-cheapest state. 

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In addition, Alabama already ranks 12th among the states where mortgage delinquency is decreasing the most, according to WalletHub’s analysis. Despite this, it ranks 21st among the states adding the most mortgage debt, suggesting that while homeowners are catching up on payments, many are also taking on new financial risks.

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Alabama was followed by Mississippi (dropping 16.5%) and Iowa (dropping 16.4%). 

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What they’re saying:

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“It’s a difficult time to buy a house, given that home prices have risen astronomically over the past few years and housing shortages make it hard to find the right place even if you have the money,” Chip Lupo, a WalletHub analyst, said in a statement. “The upside is that consumers’ home-buying struggles are alleviated by the fact that the average mortgage interest rate decreased in all states between Q1 2025 and Q2 2025. Although interest rates are still down a bit from the highs we saw two years ago, they’re a far cry from the historic lows during the pandemic.”

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States where mortgage rates are decreasing the most

1. Alabama
2. Mississippi
3. Iowa
4. Indiana
5. Ohio

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See the full report here.

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Fed cuts key interest rate 

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Big picture view:

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Earlier this month, the Federal Reserve cut its key interest rate by a quarter-point and indicated that two more cuts could follow before the end of the year.|

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The Fed has been under relentless pressure from President Donald Trump to cut rates. The central bank has held rates steady since late 2024 over worries that the Trump administration’s unpredictable tariff policies will reignite inflation.

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RELATED: Fed cuts key interest rate, signals two more this year

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“Downside risks to employment have risen,” the Fed said in a statement after its two-day meeting.

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Fed officials also signaled that they expect to reduce their key rate twice more this year, but just once in 2026, which may disappoint Wall Street. Before the meeting, investors had projected five cuts for the rest of this year and next.

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