Current Mortgage Rate Outlook
Mortgage rates are likely to remain mostly unchanged in the first half of September. The direction of mortgage rates after that depends on the Federal Reserve’s actions at its two-day meeting ending Sept. 17. If the Fed cuts short-term interest rates, mortgage rates should stay about the same or drop slightly over the rest of the month. Currently, forecasters expect a rate cut. However, if the Fed leaves short-term rates alone, markets will be surprised, and mortgage rates will probably bounce higher.
Impact on Home Buyers and Refinancers
The current mortgage rate is not favorable for buyers and refinancers. The 30-year fixed-rate mortgage averaged a little under 6.7% in August, making it hard for home shoppers to afford homes at current prices. As a result, many would-be buyers have been sitting out the traditional homebuying season. In the first seven months of 2025, people bought 2.33 million existing homes, compared to 3.06 million homes over the same period in 2019. Additionally, few homeowners have an opportunity to refinance into a lower rate, as the guideline for refinancing is to reduce the interest rate by at least three-quarters of a percentage point.
Refinancing Opportunities
With current rates around 6.6%, refinancing might be worthwhile if a homeowner’s mortgage rate is above 7.25%. However, hardly anyone is in that situation. According to the Urban Institute, only 2.4% of borrowers had refinanceable mortgages when the 30-year mortgage averaged 6.8% this summer. Now that rates are slightly lower, a few more loans are refinanceable, but not many.
Factors Driving Mortgage Rates
The Federal Reserve sets interest rates to meet two goals: keeping inflation under control (around 2%) and achieving maximum employment. Lately, the Fed has been facing an uncommon bind: inflation is higher than desired, while job growth is slowing. The central bank has three options: cut interest rates to prevent widespread unemployment, raise interest rates to reduce inflation, or leave rates alone and wait to see which gets worse. Investors seem fairly sure that the Fed will choose to cut rates at its September meeting, but it’s not a certainty.
Forecasters’ Predictions
Fannie Mae and the Mortgage Bankers Association predict that rates will fall gradually over the next few months. However, their forecasts diverge after the first quarter of 2026. Fannie Mae predicts that rates will continue to fall through the end of 2026, while the MBA says they’ll stabilize at around 6.5% most of next year.
Previous Predictions and Actual Outcomes
In the previous month, it was predicted that mortgage rates would probably stay about the same in August, with a possibility of going down. However, the rates went down decisively, with the average on the 30-year mortgage dropping from 6.84% in July to 6.66% in August.
Conclusion
In conclusion, the current mortgage rate outlook is uncertain and depends on the Federal Reserve’s actions. While forecasters expect a rate cut, it’s not a guarantee, and the actual outcome may differ. Home buyers and refinancers should be aware of the current market conditions and the factors driving mortgage rates. By understanding these factors and staying informed, they can make more informed decisions about their mortgage options.
