Mortgage Rate Predictions for August: When Will Mortgage Rates Go Down in 2025?
The current mortgage interest rates forecast is for rates to remain elevated compared to where they stood pre-pandemic, but drift downward over the rest of the year. The Federal Reserve has signaled its intention to act cautiously in 2025 — potentially utilizing only two rate cuts — and this could mean mortgage rates have less reason to fall as we progress through the year.
Right now, market watchers are still waiting to see the effects of President Trump’s tariffs, which could increase inflation and create a domino effect that would push up mortgage rates. That said, don’t expect August to bring mortgage rates that move dramatically in either direction.
In the long term, high rates and low affordability will likely keep the housing market sluggish this year.
Mortgage rates forecast for August 2025: When are rates expected to drop?
National average rates ended July at 6.72%, and experts anticipate further modest declines in the coming months. Fannie Mae, for example, expects rates to move lower and ultimately close the year at approximately 6.4%.
Even if mortgage rates do fall below 6.4% at some point in 2025, they aren’t expected to dip much lower than that — and rates could also go the other direction if the economy weakens, inflation rises or bond investors pull back due to economic uncertainty.
It’s almost certain that rates will remain high compared to the levels seen during the height of the COVID-19 pandemic, when average 30-year mortgage rates were around 2.65%. Those record lows, as nice as they were, might not ever be seen again in our lifetimes.
What has been the impact of tariffs on mortgage rates?
So far, President Trump’s tariffs haven’t had a distinct effect on the mortgage market. However, many economists believe that the tariffs have already begun to create inflationary pressure, which could eventually push up mortgage interest rates.
“Potential homebuyers should prepare themselves for the distinct possibility that tariffs will cause housing prices to rise, perhaps significantly,” according to Matt Schulz, LendingTree’s chief consumer finance analyst.”
The rising cost of building materials is making it more expensive to build new homes, and giving potential homebuyers pause.
And, even if the Fed did start cutting interest rates again, observes Schulz, there’s no guarantee that mortgage rates would follow suit. In fact, rates actually rose slightly in the immediate aftermath of the Fed’s most recent rate cut in December.
How does the Federal Reserve affect mortgage rates?
→ A Federal Reserve rate cut directly affects adjustable-rate mortgages, since their interest rates are calculated using a number — known as an index — that fluctuates with the broader economy. The Fed’s cuts are to the federal funds rate, which is a benchmark index.
→ The Fed’s rate cuts indirectly impact fixed-rate mortgages, which can move more independently and, in some cases, can even move in the opposite direction of the federal funds rate. That said, when the federal funds rate drops, mortgage rates tend to follow. They can also drop in anticipation of a federal funds rate cut, as they did just before the Fed’s September 2024 rate cut.
Will home affordability improve in August?
Potential homebuyers shouldn’t expect significantly better affordability in August than they saw during most of the last few months. Here’s why:
Mortgage rates won’t drop without a Fed rate cut
The Federal Reserve declined to cut the federal funds rate at its last meeting on July 29-30, removing that particular incentive for mortgage rates to move downward.The Fed might cut rates at its Sept. 16-17 meeting, but it seems unlikely. Fed chairman Jerome Powell has emphasized the need to move slowly while evaluating how tariffs are affecting the economy. Until regulators act, consumers probably won’t see major rate drops.
Home prices run high in August
Historically, August is only a moderately expensive month in which to buy a house. Unsurprisingly, none of the best days of the year to purchase — the days on which you pay one of the lowest premiums — appear in August, according to an analysis by real estate data company ATTOM.
That said, the potential for some small price breaks is on the horizon. If the amount of available housing — also known as housing “inventory” — rises significantly, that could help with affordability. Inventory has grown in recent months, and in July rose 16% YoY.
Additionally, some select parts of the nation are starting to see lower home prices. “They aren’t plunging,” Schulz observes, “but in places like Florida and Texas in particular, home prices were on a rocket ride for so long — but now [they’ve] begun to fall.”
Home affordability remains low
Unfortunately, the housing market continues to be prohibitively expensive for many Americans. More than 80% of metro areas in the U.S. saw the median existing home price rise in the first quarter of 2025. In fact, median home prices have risen by roughly 12% over the last four years, landing at $410,800 in Q2 2025. To put that in perspective, the national median monthly mortgage payment homebuyers applied for was a hefty $2,172 as of June 2025.
Why is there a housing shortage?
High rates and the “mortgage rate lock-in” effect, which makes homeowners reluctant to sell, continue to drive up home prices. More than 8 in 10 homeowners with a mortgage have an interest rate below 6% as of the fourth quarter of 2024, according to data from the Federal Housing Finance Agency. That’s why they’ll likely need to see rates come down further before feeling like it’s time to venture back into the market.
Home sales are picking up slowly, but remain low — especially for existing home sales, which have stalled to their slowest pace in nine months. Purchase volume was 17% higher than this same time last year, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey for the week ending July 25, 2025.
That’s no surprise in today’s tight housing market, but the market does continue to dish out a few curveballs. For instance, the median existing home price overtook the median new home price in 2024 for the first time since 1989, according to the National Association of Home Builders. This is a factor homebuyers should take into account as they shop, especially if they haven’t considered a new home up until now.
Explore whether it’s better to rent or buy.
Current mortgage rates for August 2025
Current refinance rates for August 2025
Refinancing in 2025: What you need to know
Refinancing doesn’t make sense for most homeowners sitting on the low rates they locked in before 2022. That’s when the market began its march upward — moving ever further from the sanguine rates of 2021 which, even at their highest point, barely exceeded 3%.
However, refinance application volume has grown slowly over the course of 2025, and has already picked up significantly since we’ve entered peak homebuying season. In fact, this year’s spring refinance volume overtook last year’s by 45%, according to the MBA’s data. And so far summer sales are heading in a similar direction, overtaking last year’s by 26%.
Who does refinancing make sense for right now?
A refinance might make sense for some borrowers as long as they know exactly what benefit they’ll get out of it. For example, if you’re refinancing an adjustable-rate mortgage (ARM) to a fixed-rate loan, tapping your equity with a cash-out refinance or getting a new interest rate that will lower your payments.
It’s typically smart to hold off on a refinance until you could get a rate that’s at least 50 basis points Basis points are units used to measure changes in interest rates. One hundred basis points are equal to 1 percentage point, so 50 basis points are equal to 0.50%. lower than the one you already have — and ideally 75 to 100 basis points lower.
Should I wait to refinance after the Federal Reserve’s next interest rate cut?
If you can benefit from a refinance right now, it may make sense to act sooner rather than later because waiting for a rate cut could be a long wait. “I think significant improvement in interest rates is probably more than a month or two away,” Schulz says.
Weigh how the savings you could achieve in the current market will affect you — if they’ll pull you back from the edge of financial desperation, it makes sense to act quickly. If you’d just like to save a little money, it could make sense to wait.
The big picture: What’s driving today’s mortgage rates?
Although pandemic-related inflation took longer to cool than expected, it is cooling. In fact, after reaching a high point in 2022, it slowed down steadily all the way through the spring of 2025. This suggests that the most acute pandemic-driven price pressures have largely worked through the system.
However, we’re now dealing with policy-driven inflationary pressures rather than purely pandemic-related ones. With President Trump’s tariffs continuing to percolate through the U.S. economy, inflation is still running above the Fed’s target. This makes the Fed pretty unlikely to make cuts. So, for now, getting into the market means making peace with a rate between 6.5% and 7%.
Ultimately, homebuyers should focus on what they can afford in the current market rather than obsessing over the future. “Shop around for rates,” Schulz urges. “Yes, rates are going to be high everywhere, but they can still vary significantly among lenders. Those differences can be a big deal because even a fraction of a point difference on an interest rate can save you hundreds or even thousands of dollars over the life of the mortgage.”
Will Trump lower mortgage interest rates?
Although President Trump has promised to lower interest rates, the reality is that a president can’t unilaterally change interest rates. Interest rates are determined by several factors including the financial markets and the Federal Reserve — not executive orders or presidential decisions.
Mortgage rates are even more complex, and respond to additional factors like the cost of building materials, employment rates and housing inventory.
That said, Trump and those around him have proposed privatizing Fannie Mae and Freddie Mac, imposing large tariffs, stripping the Fed of its autonomy, firing Fed chairman Jerome Powell and gutting the U.S. Department of Housing and Urban Development (HUD) — actions that would result in rising inflation. Higher inflation typically means higher home prices and higher mortgage rates, but — if the trend of elevated inflation persists — it can also mean that there won’t be a cheaper time to purchase a house in the near future.
How to get the best mortgage rates
1. Boost your credit score
Pay your bills on time, minimize your credit card balances and avoid opening several new credit accounts at once. You’ll get the best conventional mortgage rates with a 780 credit score or higher.
Learn more about ways to boost your credit score.
2. Compare rates from multiple lenders
LendingTree data consistently show that consumers who shop around for mortgage rates typically save money. Get a loan estimate from three to five different mortgage lenders and compare the rates and terms you’re offered.
Learn more about our picks for the best mortgage lenders.
3. Consider paying points
A mortgage point costs 1% of your loan amount, and paying for points allows you to “buy” a cheaper interest rate. Read the fine print if you see an online rate that looks lower than what other lenders are offering — there’s a good chance you’ll pay points to get it.
Ready to see competitive rate offers on LendingTree?Frequently asked questions
If you can afford a mortgage and find a home that suits your needs, now can be a good time to buy, despite high rates and a limited number of homes for sale.
Timing the market is extremely difficult, if not outright impossible. So if you’re waiting to make a choice based on what you hope will happen instead of what’s already going on, you could end up missing out on a lot of good opportunities — even in today’s expensive housing market.
“There’s no reason to think that the housing market is going to crash anytime soon,” Schulz says. Low unemployment and foreclosure rates, as well as a moderate housing inventory increase are all signs that the housing market is relatively healthy, he adds.
And, if you’re thinking a housing market crash could even bring some benefits — like lower home prices — he offers this reminder: “These things don’t happen in a vacuum. A housing market crash very well might be accompanied by a recession, for example. That would likely mean increased unemployment and greater overall economic uncertainty, leaving people even less able to afford to buy.”
A mortgage interest rate is the base rate you’re charged to borrow money, but a mortgage annual percentage rate (APR) is the total cost of taking out a mortgage (the interest rate plus closing costs and fees). Both numbers are expressed as a percentage. For more details, check out our guide to distinguishing an APR versus interest rate.
The Federal Reserve’s monetary policy indirectly impacts fixed-rate mortgages, which are often tied to the 10-year U.S. Treasury bond yield. The Fed’s policies have a direct effect on loans with variable interest rates, including ARMs, credit cards and home equity lines of credit (HELOCs).
Haggle for a lower interest rate by using your mortgage offers as leverage. Ask each lender about matching your lowest quoted rate. Consider making a larger down payment, select an ARM loan with a lower initial rate or ask your lender about your mortgage buydown options.
Discuss mortgage rate lock options with your loan officer once you’re under contract on a home and moving through the application process. Rate locks usually last between 30 and 60 days, but they can be longer. Watch your expiration date — you may face a rate lock extension fee if your loan doesn’t close before your rate lock expires.
Mortgage rates dropped to a historical low of 2.65% in January 2021, when the Federal Reserve cut the federal funds rate to 0% to stabilize the post-pandemic economy.