Weekly Mortgage Rates

August 26, 2025

“So You’re Saying There’s a Chance”

Fed Chair Powell finally opened the door to a potential September rate cut during his speech at the Jackson Hole Economic Symposium. He pointed to a shifting balance of risks. Focusing on employment stability over a strict adherence to the Fed’s 2% inflation target. This marks the Fed changing its stance on inflation from a set target to “flexible inflation targeting.”

Explaining the reason for the shift, Powell described the labor market as being in a “curious balance.” Recent data shows less labor supply, partly due to shifts in immigration, which has masked the simultaneous declining demand for workers. The unusual situation suggests that downside risk to employment is rising, and the Fed is acknowledging that with a focus now to prioritize job stability.

A Shift in Fed Policy and What It Means for Mortgage Rates

The White House has been advocating for lower interest rates for months, driven by the ballooning interest expense on the national debt—now the third-largest federal budget item, behind Social Security and Medicare, and surpassing even defense spending. Lowering the federal funds rate could lower the government’s borrowing costs, potentially reducing deficit spending over time, which would in fact help mortgage rates.

The link between Fed rate cuts and mortgage rates is indirect. Mortgage rates are more closely tied to long-term Treasury yields, which are influenced by market expectations of future inflation, deficit spending, and the economy. A Fed rate cut may not immediately lower mortgage rates, but it could signal a broader easing cycle, leading to lower long-term rates gradually.  

Employment Data- More Important Than Ever

In all the conversations with clients these past few weeks, many seem to be on hold waiting for the September Fed meeting, thinking that will be the moment to strike with lower rates. But the upcoming employment reports on September 5^th (August Non-Farm Payrolls) and September 9^th (The revisions to the last 12 months of employment data) could have a bigger impact on mortgage rates than the Fed meeting.

Markets have already priced in the September rate cut, so more improvement in rates would need to come from unexpected weakness in the employment figures. Conversely, stronger-than-expected data could lower rate-cut expectations, keeping mortgage rates elevated.

What’s Ahead

On Friday, the Fed’s preferred inflation gauge PCE will be released. Expecting a slightly hotter reading than last month but since the Fed has signaled that they are ok with inflation running a little hotter than their target now, it won’t have as much impact as usual. Unless it is significantly higher than expectations, which could still spook markets so we will keep an eye on it.  

Today’s Rates

LICENSED BY THE CALIFORNIA DEPARTMENT OF REAL ESTATE LICENSE A division of TYKY (DRE #01919683) (NMLS LICENSE #257773)

RATES ARE CURRENT AS OF 08-26-2025. SUBJECT TO BORROWER APPROVAL, FICO SCORE, LTV AND PROPERTY TYPE.

*APR IS BASED ON ESTIMATED FINANCE CHARGES OF $6935

**APR BASED ON ESTIMATED FINANCE CHARGES OF $16,430

***APR IS BASED ON ESTIMATED FINANCE CHARGS OF $10,969 THIS INCLUDES FHA MORTGAGE INSURA

NCE PREMIUM

****APR BASED ON ESTIMATED FINANCE CHARGES OF $8343

FEES INCLUDE 1% ORIGINATION, NO POINTS, $1095 PROCESSING AND $0 UNDERWRITING FEE    

Source info for today’s update: Wall Street Journal, MBS Highway & Rate Alert