The Federal Reserve’s latest rate decision and new employment data are prompting renewed focus on the direction of mortgage rates. First, the Fed opted to maintain the federal funds rate at 4.25%–4.50% following its meeting on July 29-30, 2025.¹ Just two days later, the August 1 jobs report revealed a slowdown in hiring, with only 73,000 jobs added.² Additionally, job growth for May and June was revised downward by a combined 258,000 jobs.³

In the days surrounding these developments, mortgage rates responded notably. On Thursday, following the Fed’s announcement but before the jobs report, the average 30-year conforming rate stood at 6.72%. After the weaker-than-expected employment data was released, rates declined to 6.62%—the lowest average since April.⁴

These shifts have prompted renewed discussion about how upcoming economic data—and potential changes in Federal Reserve policy—might influence mortgage interest rates in the months ahead. This edition of the Mortgage Monitor discusses three possible scenarios.

Scenario 1: Mortgage Rates Could Remain Relatively the Same

The Federal Reserve has held rates steady for five straight meetings since January 2025, and this has not led to a notable shift in home mortgage rates. Throughout most of the year, average interest rates for a 30-year fixed conforming mortgage have hovered around 6.8%, reflecting a relatively stable lending environment despite broader economic fluctuations.⁴ The U.S. unemployment rate has fluctuated within the 4.0% to 4.2% range since May 2024.⁵ Consistent and stable employment data in the upcoming months might prompt the Federal Reserve to keep the benchmark rate steady.

While the July jobs report showed signs of labor market weakness, the Fed may still opt to maintain its current stance if inflation remains contained and broader economic indicators suggest resilience. In this case, mortgage rates could continue to hold steady.

Other factors that may support stable mortgage rates include moderate consumer spending, balanced housing supply and demand, and investor expectations that the Fed will remain cautious in its approach.

Scenario 2: Mortgage Rates Could Decrease

A continued decline in the U.S. labor market may lead the Federal Reserve to lower the federal funds rate at its upcoming meeting in September. 

“If current labor market conditions persist or worsen in August and September, it may become imperative for the Federal Reserve to enact a rate cut to encourage borrowing and investment,” said Brett Hively, Senior Vice President and Mortgage Capital Markets and Financial Strategist at Ameris Bank.

Hively stated there are additional factors that might influence a rate cut. 

“A reduction in the benchmark rate may also happen if the U.S. economy slows down or if inflation decreases significantly. In either case, lower Treasury yields often follow, and that typically leads to lower mortgage rates.”

Scenario 3: Mortgage Rates Could Increase

While the Federal Reserve is not expected to raise interest rates in the near term—especially following the July jobs report and recent downward revisions to employment data—mortgage rates could still rise due to factors outside of Fed policy.

“Even if the Fed holds or lowers the benchmark rate, mortgage rates can move independently,” Hively said. “Investor sentiment, inflation expectations, and shifts in Treasury yields all play a role in shaping long-term borrowing costs.”

Mortgage rates are closely tied to the 10-Year Treasury yield, which reflects market expectations about inflation, economic growth, and risk. If investors grow concerned about inflation or global financial instability, yields may rise—leading to higher mortgage rates even in a stable or easing Fed environment.

Takeaway

Forecasting the Federal Reserve’s next move—and its impact on mortgage rates—remains a complex and uncertain endeavor. While upcoming employment data and broader economic indicators will be closely watched, outcomes are difficult to predict with precision.

According to Hively, relying on predictions and trying to time the market can leave buyers unable to take advantage of favorable conditions as they arise.

“Waiting for the ‘perfect’ rate environment can leave buyers sidelined," he said. “Instead, staying informed and acting when a property aligns with both needs and budget is often the smarter move.”


Sources:
¹ https://www.federalreserve.gov/monetarypolicy/monetary20250730a.htm
^{2, 3, 5} https://www.bls.gov/news.release/empsit.nr0.htm
⁴ https://www2.optimalblue.com/obmmi


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Ameris Bank does not endorse nor is affiliated with the companies listed in this article.