Mortgage Rates Dip to New 2025 Lows as Fed Cut Looms

Sept. 5, 2025 - U.S. mortgage rates fell again on Friday, with the average 30-year fixed rate sliding to 6.50%, its lowest point of the year, as investors priced in a likely Federal Reserve rate cut and weaker labor data.

Investors and borrowers alike are watching closely as the potential September Fed rate reduction and a disappointing August jobs report combine to push borrowing costs lower and fuel a surge in refinancing activity.

Key developments

30-year fixed rates fall The national average rate on a 30-year fixed mortgage dropped to 6.50%, down six basis points from last week and marking a new low for 2025.
Refinance demand surges With rates declining, refinancing applications soared to nearly 47% of all mortgage activity, the highest share since October 2024.
Short-term jobs data weighs on rates The August employment report showed just 22,000 jobs added, far below expectations and reinforcing market hopes for an imminent Fed rate cut that would further ease mortgage costs.
Fed rate cut anticipation Markets now fully price in a 25-basis-point reduction in the federal funds rate at the Sept. 16-17 meeting, though history suggests mortgage rates may not always follow Fed moves immediately.

Why it matters

Lower mortgage rates improve home-buying affordability and boost refinancing opportunities for existing homeowners, potentially unlocking substantial savings on monthly payments. However, fluctuations remain likely as markets react to incoming economic data and Fed policy signals.

What’s next

Investors and homebuyers will be closely eyeing:

Fed meeting outcomes on Sept. 16-17 for confirmation of rate cuts.
Inflation and payroll releases due in mid-September, which could sway mortgage pricing.
Treasury yields, since 30-year mortgage rates track the 10-year Treasury rather than the Fed funds rate directly.

Borrowers looking to lock in or float rates should weigh the potential for further declines against the risk of short-term volatility.