Mortgage Rates Today, August 25, 2025: Fed Friday Helped Mortgage Rates to 2025 Low

The bigger picture

We were pretty worried when Federal Reserve Chair Jerome Powell stood to speak at the Economic Policy Symposium in Jackson Hole, Wyoming, last Friday. Many on Wall Street and in the financial media expected him to take a tough line over future cuts to general interest rates.

What did Powell say?

But Powell was much more open than many feared to such a cut on September 17, when the Fed's rate-setting body next meets. That body is called the Federal Open Market Committee or FOMC.

And mortgage rates fell appreciably on Friday as the implications of his words sank in. Mortgage News Daily reckons they hit a 2025 low, though only just. Our own figures, sourced from I Can Buy, concur.

Our worries were based on the Fed's relentless focus on inflation in recent years. The central bank has been embarrassed that it misread Covid-era inflation and had waited too long before raising general interest rates.

Of course, Powell made no promises. "Monetary [rates] policy is not on a preset course," he said, according to the official transcript of his speech. "FOMC members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach."

The Fed has a dual duty to optimize inflation and employment, trying to keep the two at levels that promote economic prosperity. Since the painful Covid-driven bout of inflation, its focus has appeared to be mostly on reining in prices. Perhaps Powell's key line that morning was, "The balance of risks appears to be shifting."

However, Powell also highlighted the exceptional uncertainty currently surrounding the economy. "This year, the economy has faced new challenges," he said. "Significantly higher tariffs across our trading partners are remaking the global trading system. Tighter immigration policy has led to an abrupt slowdown in labor force growth. Over the longer run, changes in tax, spending, and regulatory policies may also have important implications for economic growth and productivity. There is significant uncertainty about where all of these polices will eventually settle and what their lasting effects on the economy will be."

How did markets respond to the speech?

Stock markets soared, and the dollar and bond yields plunged on Powell's speech. Bond yields particularly matter to us because mortgage rates are largely determined by the yield on a type of bond, the mortgage-backed security (MBS).

“Chair Powell acknowledged that shocks to both labor supply and demand pose real downside risks — especially given recent soft jobs data," Lauren Goodwin, an economist at New York Life Investments, told The New York Times on Friday. “This suggests the Fed is becoming more attuned to labor market fragility and may be quicker to act in response.”

But some still believe that the Fed is getting things wrong. “I was surprised by the dovishness of the speech,” Michael Strain
of the American Enterprise Institute, a right-leaning think tank in Washington, D.C., told The Wall Street Journal. “It underweights the inflationary pressures in the economy and overweights the risk of labor market softening.”

The Journal went on to draw a "soft landing" metaphor. A soft landing is when the Fed manages to rein in rising prices without causing a slump in employment and a recession.

"Powell’s speech made clear how the Fed chair is still steering toward the soft landing he has long sought, but there’s significantly more air traffic to navigate around," said the Journal. "The question is whether his latest approach can bring the economy in for a smooth touchdown without either stalling out or overshooting the runway."

What's the danger for mortgage rates now?

Last Friday's fall in mortgage rates was down to investors pricing in a greater likelihood of a cut to general interest rates at the next meeting of the FOMC on September 17. Mortgage rates are often unchanged or can even move higher on FOMC announcements of cuts.

However, we don't believe that's because the Fed and mortgage rates lack any alignment. It's more likely to be because bond investors trade ahead of announcements and other events and economic reports.

That means cuts to general interest rates are already priced into mortgage rates before a Fed announcement is made. It's only if an announcement surprises markets (which is rare) that mortgage rates need to move that day. A bigger-than-expected cut might pull mortgage rates down, while a smaller-than-expected (or zero) cut could push them higher. If an announcement delivers what's expected and doesn't affect mortgage rates, but an economic report delivers unexpectedly good or bad news on the same day, those rates are likely to move in response to the new data.

And that's what we now face. If the chances of a September 17 rate cut change between now and then, mortgage rates will likely move in response. And if that day's announcement delights (a bigger-than-expected cut) or disappoints (no cut), that will almost certainly send mortgage rates soaring or tumbling.

What's coming up?

Although economic reports are usually the main drivers of changes to mortgage rates, they're not the only ones. The general mood in markets and economically consequential news can also affect those rates. News items concerning tariffs and deficit funding are especially influential at the moment.

Mortgage rates today

• August consumer confidence (tomorrow)
• Second reading of gross domestic product during the second quarter of 2025 (Thursday)

Today's MarketWatch economic calendar contains just one economic report: new home sales in July. They're expected to increase to 632,000 (annualized) from 627,000 in June. It's rare for this report to have a perceptible impact on mortgage rates.