Tennessee – The Tennessee Department of Financial Institutions has announced the maximum allowable annual interest rate for conventional home loans for July 2025, setting it at 8.94%. The rate was determined in accordance with a state statute passed by the General Assembly in 1987 (Public Chapter 291).
The rate is calculated as four percentage points above the average yield of long-term U.S. government bonds, as adjusted to a 30-year maturity by the U.S. Department of the Treasury. For the most recent available weekly average preceding the announcement, the bond yield was reported at 4.94%, resulting in the maximum home loan interest rate of 8.94%.
This monthly determination is typically influenced by market conditions and federal benchmarks, but a notable change in federal policy may impact how these figures are interpreted moving forward. The Federal National Mortgage Association (Fannie Mae) has recently discontinued its free market auction system for commitments to purchase conventional home mortgages. The long-standing auction model had previously influenced rates and commitments in the mortgage market.
Because of potential conflicts or overlaps between state and federal regulations, homebuyers and lenders are advised to seek legal counsel. In particular, parties should examine the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and subsequent amendments, including P.L. 96-399, as well as regulations issued by the Federal Home Loan Bank Board.
These federal statutes may preempt state usury laws in certain circumstances, especially for loans made after March 31, 1980. As such, while Tennessee has established the maximum effective interest rate for July, the federal regulatory landscape may supersede this limit in specific cases.
The Department’s monthly rate announcements serve as a benchmark for lenders and borrowers throughout the state, ensuring transparency and regulatory consistency in the housing finance market.
For further guidance, residents and financial institutions are encouraged to consult their legal advisors or reach out to the Department of Financial Institutions.