Weekly Mortgage Rates

August 12, 2025

Sticky Inflation

This morning’s July CPI report showed no major surprises. Headline inflation rose 2.7% year-over-year, while core inflation (excluding food and energy) increased 3.1%. Notably, the report indicated minimal inflationary pressure from tariffs. Is it good or bad news that inflation remains above the Fed’s 2% target without significant tariff impact? Time will tell, but “sticky” best describes current inflation readings. This report doesn’t change expectations for a Federal Reserve rate cut in September, which is already factored into today’s mortgage rates.

The Paradox

Last week’s 10-year and 30-year Treasury auctions revealed weaker-than-expected demand, with yields higher than anticipated. Signaling that bond traders expect long-term rates to stay elevated or rise. This is despite the almost certain Fed rate cut in September. The paradox is that traders are wary of loosening monetary policy (lower Fed rates) fueling inflation, which could push long-term yields higher. The opposite of what we would like to see.

What’s Ahead

The next major report is Retail Sales on Friday, which could impact rates. Mortgage rates are likely to remain stable in the near term until another “juggernaut”—shifts the outlook.

Market Strategies

I have talked to a lot of clients recently who are on hold with their next home purchase because they are expecting lower mortgage rates after the Fed’s September rate cut. Educating them on how Fed actions impact mortgage rates might be helpful here.

The simplest explanation: Fed rate cuts lower short-term rates, affecting things like credit cards and home equity loans, but mortgage rates are tied to long-term rates, such as the 10-year Treasury yield. These are driven by market expectations of inflation and economic growth. If investors anticipate persistent inflation, long-term rates—which includes mortgage rates—may remain higher despite Fed cuts.