**Sources (with links) used for this article are compiled at the bottom. These sources would also be good for further reading/research into the topic.
Mortgage Rates and Fed Commentary
Written as of August 11: In late July, mortgage rates remained relatively steady at elevated levels. The average 30-year fixed rate hovered in the high-6% range (around 6.7% as of early August), offering a bit of relief from the 7%+ peaks seen earlier this year. This stability came as the Federal Reserve’s late-July meeting delivered no surprises. The Fed held its benchmark interest rate unchanged at roughly 4.25%–4.50%.
Fed officials acknowledged that inflation is still running above their 2% goal and that uncertainty about the economic outlook remains high. They signaled a cautious stance going forward, indicating they will “carefully assess incoming data” before any further policy moves. In practical terms, that means no immediate rate cuts are on the horizon. (Notably, two Fed members (both Trump appointees) even voted to cut rates by 0.25% at the meeting, hinting that a minority on the committee is leaning dovish.)
For now, the Fed’s pause, combined with continued quantitative tightening (the Fed is still shrinking its holdings of Treasury and mortgage-backed securities), has helped keep longer-term yields and mortgage rates in a holding pattern.
Small Fluctuations, Brief Impact
Mortgage originators are finding that even small rate fluctuations can spur or dampen borrower activity. Early in July, for example, rates dipped slightly to their lowest levels in months, and lenders saw a brief uptick in applications. By August 4th, rates had inched back up toward mid-July levels, but they remain below the cycle highs from early 2025.
The consensus is that mortgage rates will stay in this higher range until clear signs emerge that inflation is cooling more substantially. MLOs should continue to watch Fed communications and economic data closely – any hint of future Fed rate cuts or, conversely, renewed tightening could quickly move mortgage rates and refinance opportunities.
For now, prepare your clients for rates in the 6%–7% range as the “new normal,” while keeping an eye on late-year developments (like easing inflation or slower growth) that might finally pull rates downward.
Purchase and Refinance Demand
Mortgage application activity slowed as July progressed. By the final week of the month, total application volume had fallen to its lowest level since May. Both purchase and refinance applications declined in the second half of July. The Mortgage Bankers Association’s Weekly Survey showed a ~4% drop in applications during the week ending July 25. Purchase loan applications were down about 6% from the prior week (seasonally adjusted), and refinance applications ticked 1% lower.
According to MBA’s analysts, many prospective buyers remain hesitant. Ongoing economic uncertainty and a shakier job outlook are “weighing on prospective homebuyers’ decisions,” noted MBA Vice President Joel Kan. It’s summer, traditionally a peak homebuying season, but demand is subdued relative to past years.
The 30-year fixed rate on new mortgage applications averaged around 6.83% in MBA’s late-July survey. That high rate continued to deter homeowners from refinancing their existing loans. Indeed, refinance volume has been running very low all year. The refinance index in late July was about 30% higher than its level a year ago.
But recall that mid-2024 was a historic low point for refis. In absolute terms, today’s refi activity is a fraction of normal levels. Virtually no one with a 3% mortgage is going to refi into a 6.5–7% rate unless they have a compelling reason (such as tapping equity or restructuring debt).
The refis that are happening are mostly cash-out refinances, divorces, or other special cases. This is reflected in the mix of loans... Refis now make up roughly 40% of all applications, an unusually high share that says more about weak purchase volume than any refinance resurgence. Many homeowners who might’ve considered refinancing are instead opting for home equity lines or second loans to preserve their ultra-low first-mortgage rates.
On the purchase side, mortgage demand remains lukewarm, though slightly improved from last year’s doldrums. MBA’s purchase index in late July was about 17% higher than the same week in 2024. That year-over-year bump is encouraging on the surface, but remember that last summer’s housing market was sluggish, with buyers spooked by rising rates.
In context, we’re comparing to a low base. Home purchase applications are still far below the frenzied levels of 2020-2021. Many first-time buyers and moderate-income families are still on the sidelines, held back by affordability challenges or economic jitters. Those who are in the market are extremely rate-sensitive. Even minor rate drops tend to bring out more buyers, as we saw in early July when a small dip in rates led to a noticeable (if temporary) jump in applications.
When rates tick back up, buyers pump the brakes again. This pattern suggests originators should be ready to act quickly when opportunities arise (for instance, a brief rate dip or a new incentive program), as borrowers are quickly tuning in and out of the market based on financing costs.
Housing Inventory and Home Prices
One silver lining in the current market is that housing inventory is finally improving in many areas. After years of chronically tight supply, the number of homes for sale has been creeping up. Nationwide, total active listings in mid-July were up about 12% compared to a year earlier. To put it in perspective, Redfin data counted roughly 1.17 million homes actively on the market across the U.S. in the four weeks ending July 13.
Likewise, the National Association of REALTORS® reported 1.53 million existing homes available for sale at the end of June. That equates to a 4.7-month supply of inventory at the current sales pace, which is a significant increase from about 3.9 months’ supply a year ago. While a 4.7-month supply is still slightly below the ~5–6 months considered a truly balanced market, it’s much closer to equilibrium than we’ve seen in recent memory. In short, buyers have more options to choose from now than they did a year ago, and the housing market is gradually rebalancing.
Several factors are contributing to this inventory uptick. Seasonality is one. Summer usually brings out more listings. But beyond that, homes are lingering on the market longer (as sales have slowed), which naturally boosts the available inventory at any given time. The typical home days-on-market has lengthened compared to last year, as noted below.
Also, while many existing homeowners remain reluctant to sell, understandably, since selling might mean giving up a 3% mortgage to buy another home at a 7% rate, homebuilders are stepping in to fill part of the gap. New construction sales have increased this year, aided by builders offering incentives (like interest rate buydowns, closing cost assistance, and price cuts on spec homes) to attract buyers. This influx of new homes for sale has bolstered overall inventory.
For example, in some markets, newly built homes and condos now make up a growing share of what’s for sale. The net effect is that buyers in summer 2025 have a much better chance of finding a home than they did during the ultra-tight pandemic market. For MLOs, this means your pre-approved buyers might finally have more success getting under contract – though they may also take longer shopping given the wider selection.
Despite more inventory, home prices nationally are holding steady (and even rising modestly in some areas). In June, the median existing-home sale price reached $435,300, the highest on record per NAR. That was about 2% higher than June of last year.
Similarly, Redfin reported the median sale price in mid-July was ~$401,000, up a slight **1.7% year-over-year. These low single-digit price increases suggest that price growth has drastically cooled from the double-digit leaps we saw in 2021. In fact, industry forecasts predict national home prices could flatten or even tick down by the end of 2025.
We’re essentially at an inflection point where improved supply and higher mortgage costs have taken the upward pressure off prices. It’s notable that the median price hitting a record high is more a reflection of the mix of sales (fewer low-end homes for sale, more high-priced homes in the mix) and the legacy of earlier supply shortages, rather than a red-hot market. In reality, many sellers are finding that they can’t overprice their homes – if they do, the home will sit unsold.
Indeed, the market has shifted to be more buyer-friendly in many locales. Key indicators of competition are softer than last summer... Homes are generally staying on the market longer (the U.S. median days on market is around 38 days now, which is five days longer than a year ago). Only about 28% of homes sold above their list price in recent weeks, down from roughly one-third of homes a year ago. And the average sale-to-list price ratio is about 99%, slightly lower than it was last summer, meaning on average, homes are selling for a hair below asking, whereas a year ago they were basically at asking (or above in many cases).
Price reductions have also become more common. In short, the bidding wars have cooled in most markets. Buyers today can often negotiate on price or repair concessions, a drastic change from the “take it or leave it” frenzy of the pandemic boom. For MLOs, this evolving dynamic is important... Clients who were discouraged by fierce competition and constant outbidding might find the current market conditions more manageable. However, you should also set expectations. “More manageable” doesn’t mean “cheap.” Higher rates and still-high prices mean affordability is still a major hurdle, even if buyers aren’t having to bid $50k over asking anymore.
Borrower Sentiment and Affordability
Despite some positive trends in inventory, housing affordability remains a significant challenge. Elevated mortgage rates combined with still-high home prices have kept affordability near its worst levels in decades. As of late July, the monthly payment on a median-priced home (with 20% down) was roughly $2,700 (principal and interest) at prevailing rates. That is actually up slightly (~2–3%) from a year ago, because while home prices have only inched up, mortgage rates are higher on average than last summer.
Even though wages have been growing (the average U.S. wage is up over 4% year-over-year), it hasn’t been enough to fully offset the increased housing costs. Many Americans, especially first-time buyers, are finding that homeownership is a stretch. Saving for down payments, qualifying under debt-to-income ratios, and affording monthly payments have all become tougher.
It’s not surprising that we’re seeing a lot of creative strategies and workarounds. More borrowers are stretching loan terms (even 40-year mortgages in some cases), buying down interest rates with points or temporary buydowns, and considering adjustable-rate mortgages to get a lower initial rate. (ARMs currently make up around 8% of mortgage applications, a share that has grown as borrowers seek relief from 30-year fixed rates.)
Additionally, some buyers are turning to co-buying with family or down payment assistance programs to make the numbers work. Affordability challenges are real, and MLOs are often the ones helping clients navigate these options to bridge the gap.
Given these headwinds, it’s understandable that consumer sentiment about the housing market remains lukewarm. Fannie Mae’s latest Home Purchase Sentiment Index (HPSI) ticked down in June, falling back below 70 after a brief uptick in May. (For context, the index was well above 80 in pre-pandemic times when buying conditions were viewed much more favorably.) This means the average consumer still sees the current market as unfavorable for buying.
The majority of survey respondents continue to say it’s a “bad time to buy” a home. The top reasons cited are no surprise... High home prices and high mortgage rates are the biggest perceived barriers. However, within that gloom, there are a few glimmers of light. The share of people saying “it’s a good time to buy” rose to 28% in June, which is the highest that particular metric has been in over two years. It’s still a low figure in absolute terms, but the upward movement suggests a segment of consumers (perhaps move-up buyers or those with cash) has noticed the shifting market in their favor.
With more inventory available and sellers cutting deals, some buyers sense that their window to get a decent price on a home might be better now than it has been in recent years. In other words, the buyer sentiment is split... Most are pessimistic due to affordability woes, but a growing minority see opportunity in the cooler market.
That said, broader economic concerns continue to weigh on homebuyer confidence. In the Fannie Mae survey, a significant number of people expressed anxiety about the economy and their personal job security. Nearly 30% of respondents worry about losing their job in the next 12 months, a percentage that jumped up in June. These recessionary fears (partly fueled by talk of tariffs and trade uncertainties, which have been in the news) make some potential buyers cautious about taking on big new debt.
Additionally, consumers remain uncertain about the direction of mortgage rates. When asked where they expect rates to be in the future, 34% said higher and 25% said lower, with the rest thinking rates will stay about the same. That skew toward expecting higher rates can either spur buyers (those who fear rates will only get worse may hurry to buy now) or spook them (those who feel rates are high and rising might back off).
The net effect in June was a more pessimistic outlook compared to earlier in the spring. As an MLO, it’s important to understand this mindset. Many clients are nervous about the market, about their job, about making the “right” decision. They may need extra reassurance, education on options (like refinancing later if rates drop), and creative solutions to feel comfortable taking the leap. The good news is that if inflation continues to cool and the job market stabilizes, consumer sentiment could improve. For now, though, caution is the prevailing mood among borrowers.
Industry Shifts and Regulatory Updates
Amid these market trends, the mortgage industry has seen a few notable shifts and updates that MLOs should be aware of. On the regulatory and policy front, there’s been movement aimed at making lending simpler and preventing foreclosures.
FHA Eases Some Requirements
The U.S. Department of Housing and Urban Development (HUD) announced in late June a rollback of several FHA loan rules as part of a “cost-cutting blitz.” In a series of Mortgagee Letters, HUD rescinded over a dozen FHA guidelines that were deemed outdated or overly burdensome.
For example, FHA lenders no longer need to collect the Supplemental Consumer Information Form (which recorded borrowers’ homeownership education and language preference). This requirement was scrapped to reduce paperwork.
HUD also eliminated certain property inspection rules... One change removes the mandate for a damage inspection on homes in FEMA-declared disaster areas before loan endorsement, and another roll-back rescinds the stricter flood zone building requirements that were put in place in 2024.
Additionally, FHA relaxed its underwriting employment criteria by dropping the full-time employment requirement for Direct Endorsement underwriters, allowing lenders to use qualified part-time contract underwriters.
According to HUD Secretary Scott Turner, these moves are “bold, necessary, and long overdue." The intent is to “slash red tape” that drives up costs and slows the process. For MLOs, the practical impact should be streamlined FHA origination... Slightly less documentation to gather in some cases, and perhaps faster approvals on homes in disaster areas or other formerly tricky scenarios. It’s a welcome bit of regulatory relief, especially for those working with first-time buyers who rely on FHA loans.
VA “Partial Claim” Foreclosure Prevention
In late July, Congress took action to reinstate a useful loss-mitigation option for VA (Veterans Affairs) home loans. Lawmakers passed the VA Home Loan Program Reform Act (H.R. 1815), which reauthorizes the VA’s ability to offer partial claim options to struggling veteran homeowners.
This program, which had expired, essentially lets the VA step in when a VA borrower is on the brink of foreclosure and purchase a portion of the loan balance from the lender.
Through covering the missed payments or the amount needed to reinstate the loan (up to 25% of the loan’s principal balance in most cases), the VA helps bring the loan current. The veteran then owes that amount to the VA as a second, non-interest-bearing lien, rather than facing foreclosure.
It’s very similar to FHA’s pandemic-era partial claim program. The Mortgage Bankers Association applauded this move, calling it “a critical step forward in ensuring distressed veteran homeowners have access to a proven and sustainable loss mitigation solution.”
Once this law is signed (it was awaiting the President’s signature as of early August), VA lenders and servicers will have an important tool back in their toolkit to help veteran borrowers who fall behind. For MLOs working with VA clients, it’s reassuring to know that there’s an extra safety net for your borrowers down the line, should they ever hit financial difficulties.
LO Comp and Credit Reporting
Regulatory scrutiny on mortgage practices continues. One notable development was a lawsuit filed against a major lender (loanDepot), alleging improper loan originator compensation tactics. The suit claims that the company had a scheme to pay LOs based on loan terms (like interest rate and points) by funneling loans through an internal system to reduce commissions when borrowers got better rates. If true, that would violate the LO Comp rule under TILA, which prohibits varying an originator’s pay based on the terms of the loan. The case is still pending, but it’s a reminder for all lenders and originators... compensation rules are serious business. Make sure your comp plans are squeaky clean (no incentives to charge higher rates or fees) and that your compliance teams have clear policies in place. The CFPB has enforced on LO comp before, and we can expect them to continue watching for schemes that circumvent the rules.
In other regulatory news, a federal judge recently struck down a CFPB rule on medical debt reporting, ruling that the Bureau overstepped its authority. That rule (from the end of the last administration) would have banned credit agencies and lenders from considering medical debt on credit reports. The court’s vacating of the rule means that, for now, medical collections can still factor into credit decisions as usual. More broadly, it highlights how regulations can change quickly, especially with a new administration in Washington, we’re seeing a flurry of proposals, some pushback, and lots of legal back-and-forth.
Other areas to keep an eye on... the FHFA has been reviewing certain fair lending requirements and GSE programs, and there’s talk of possible adjustments to conforming loan limits and fees going into 2026 (nothing concrete yet). All told, it’s wise for MLOs and their companies to stay plugged into policy news.
Small regulatory changes, whether it’s a new disclosure requirement, fee structure (e.g. LLPA adjustments), or assistance program, can create ripple effects in how we originate loans and advise clients.
Looking Ahead
As we move past the summer peak and into the fall, what should mortgage loan originators watch for in the coming weeks?
Fed Signals and Mortgage Rates
Keep a close eye on Federal Reserve updates and inflation reports. Any hint that the Fed might adjust course (for example, signaling future rate cuts if economic data worsens) could push mortgage rates down, and even a modest drop in rates could unleash a wave of pent-up refinance and purchase demand.
Conversely, signs of persistent inflation or a more hawkish Fed could pressure rates upward. Staying on top of daily rate movements will help you advise clients on locking vs. floating and manage their expectations.
Housing Inventory Trends
Monitor local and national inventory levels into the fall. We’ll see if the rise in listings sustains or if it tapers off after the summer. More inventory and longer days-on-market could further shift leverage toward buyers, potentially leading to softer prices in some markets.
For your buyers, improving inventory is great news, but for your selling clients (or those tapping equity), it means pricing realistically is crucial. New construction will also be a factor. Watch how actively builders continue to market homes and incentives as they respond to market conditions.
Buyer Demand and Sentiment
Will buyer traffic pick up or slow down as we head into the latter half of Q3? Often the school-year cycle causes an early-fall bump in activity after the late-summer lull. Given the right conditions (e.g., slightly lower rates or stable home prices), we could see more first-time buyers decide to make a move.
Keep an ear to the ground with your pre-approved clients; some who were discouraged in spring might re-engage if they perceive a window of opportunity (such as more homes on the market or sellers willing to deal). Also, track consumer sentiment indicators (like Fannie Mae’s HPSI or other surveys) for changes. An uptick in buyer sentiment could translate into more leads and applications in your pipeline.
Affordability and Credit
Affordability will remain a key storyline. Watch for any changes in loan programs or assistance that could help on this front. For instance, increased down payment assistance funds, tweaks to FHA/VA fees, or new low-down conventional options could all help marginal buyers qualify. Also, keep an eye on credit performance. So far, mortgage delinquency rates are very low, but if the economy softens or unemployment rises, we might see more homeowners struggle.
That could lead to new modifications or refi opportunities (for example, borrowers seeking cash-out to pay off other debts). Being proactive with clients, like reviewing their situations for possible savings or necessary adjustments, will set you apart, especially if economic conditions change.
Regulatory and Industry Updates
Finally, stay informed on the regulatory front. With a lot of moving pieces in Washington, there may be further changes to mortgage rules, underwriting guidelines, or government programs. The upcoming months could bring clarity on things like the future of the CFPB (with court cases pending), any housing legislation in Congress, or administrative actions affecting Fannie Mae and Freddie Mac.
Even industry shifts (such as mergers, tech innovations, or changes in big lenders’ strategies) can impact your day-to-day. Make a habit of reading industry news or briefings (like this one!) so you can anticipate changes and advise your clients accordingly.
To wrap up, the mortgage market as of early August 2025 is showing some positive signs (stable rates, slowly improving inventory, motivated but cautious buyers) tempered by ongoing challenges (high costs, economic uncertainty, regulatory flux).
For MLOs on the front lines, the key is to stay adaptable. Educate and reassure your borrowers, many of whom are navigating the most complex homebuying landscape in years. Keeping up with market trends and policy changes means you’ll be ready to help clients find the right opportunities even in a changing environment.
Here’s to ending the summer strong and preparing for what’s next in 2025!
Sources
- Federal Reserve Board – FOMC Statement (July 30, 2025)
- Realtor.com – Home Purchase Sentiment Tumbles in June (July 7, 2025)
- Mortgage Bankers Association – Weekly Applications Survey Press Release (Week ending July 25, 2025)
- National Association of Realtors – Existing-Home Sales Report (June 2025)
- Redfin Data Center – Housing Market Update (4 Weeks Ending July 13, 2025)
- Scotsman Guide – “FHA rescinds a series of mortgage policies in cost-cutting blitz” (News article, June 30, 2025)
- Ballard Spahr – Mortgage Banking Update (Legal alert, July 24, 2025): VA Partial Claim Reauthorization & Veteran Foreclosure Prevention
- Ballard Spahr – Mortgage Banking Update (July 24, 2025): loanDepot LO Compensation Lawsuit Allegations
- Ballard Spahr – Mortgage Banking Update (July 24, 2025): CFPB Medical Debt Rule Vacated (Court Ruling)