Mortgage rates edged down again this week, offering potential buyers a sliver of relief as the U.S. housing market continues to cool under the weight of high prices and economic uncertainty.
This week’s mortgage rates: A closer look
As of August 3, 2025, the average 30-year fixed mortgage rate sits at 6.5%, while the 15-year fixed rate dropped to 5.625%, according to Zillow Home Loans. Rates for government-backed loans also saw modest declines:
- 30-Year FHA: 6.00%
- 30-Year VA: 6.25%
- 20-Year Fixed: 6.375%
- 7-Year ARM: 6.375%
This marks the second consecutive week of rate declines, despite the Federal Reserve’s decision to hold interest rates steady in July.
Why are mortgage rates falling?
Several economic signals are pushing mortgage rates slightly lower:
- Labor market softening: Hiring slowed for the third straight month, and unemployment ticked up in July.
- Mixed economic growth: Q2 saw a rebound, but not enough to offset the first quarter’s contraction.
- Inflation remains sticky: The Fed’s preferred inflation gauge ticked up in June, fueling internal debate over whether to cut rates sooner.
While rates remain historically high, economists now expect a modest downward trend through late 2025, especially if inflation shows signs of sustained cooling.
Housing market trends: National cooldown, regional divides
July data from Realtor.com shows the U.S. housing market has cooled modestly, with active listings rising above 1.1 million homes. But buyer demand isn’t keeping pace.
- Pending home sales fell in June, despite rising inventory.
- Home prices are still growing nationally, though at a slower rate.
- In the South and West, prices have dropped by double digits in some metros since 2022.
- Meanwhile, the Midwest and Northeast have seen strong price gains.
Buyers and sellers appear out of sync—many homeowners remain hesitant to list, while affordability remains a major hurdle for potential buyers.
Is renting a better option?
The challenging buying landscape may be shifting Americans toward rentals. The U.S. homeownership rate has hit a six-year low, while rental vacancy rates continue to decline.
However, renting isn’t without its issues:
- National rents have softened, but in cities like New York, they’re still climbing.
- An analysis by Realtor.com found it could take decades for NYC rents to become affordable again if current trends hold.
Should you buy or refinance now?
If you’re in the market for a mortgage, here are a few tips to secure a lower rate:
- Improve your credit score
- Make a larger down payment
- Keep a low debt-to-income ratio
- Lock in a rate if you anticipate rising rates in the months ahead
Some buyers may want to wait for further rate declines, but others might benefit from acting now—especially if inventory continues to rise and competition stays soft.
What happens next?
All eyes are on the Fed’s next move and upcoming inflation reports. If inflation stabilizes, mortgage rates could drop further, potentially reviving stalled buyer interest heading into fall.
Until then, expect continued regional disparities, measured seller activity, and a cautious consumer mindset.
This content is brought to you by the FingerLakes1.com Team. Support our mission by visiting www.patreon.com/fl1 or learn how you send us your local content here.
