Mortgage rates fell slightly again for the second week, declining by another two basis points, according to the Freddie Mac Primary Mortgage Market Survey as of August 20th. Recent economic data, including a lower-than-anticipated Producer Price Index, helped ease bond yields and borrowing costs. However, affordability constraints and elevated rates continue to weigh on the housing market, leading to slower sales and buyers hesitating to enter the market.
Mortgage applications decreased 0.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 14th. “Mortgage rates and applications changed little last week, with just a slight increase in refinances for conventional and VA loans, while FHA refinances were lower,” said Joel Kan, CMB, MBA’s VP and Deputy Chief Economist. “Purchase applications decreased and were also lower than last year’s pace. In addition to the economic uncertainty, affordability difficulties have reemerged as a reason for homebuyers to delay purchase decisions given the impact of higher mortgage rates on monthly mortgage payments.”
Americans pulled back on their retail spending in July and their confidence in the economy is taking a hit. That’s a potentially troubling combination for a consumer-driven economy. Retail sales fell 0.6% in July from the prior month, the Commerce Department said last Friday, down from June’s 0.2% and marking the steepest drop since May 2025. Both reports came in worse than economists had estimated in polls by data firm FactSet, showing that the lifeblood of the US economy, consumer spending, is coming under pressure. People’s dollars account for about two-thirds of economic growth. “American consumers are showing signs of fatigue,” Heather Long, chief economist at Navy Federal Credit Union, said in commentary issued Friday.
Federal Reserve officials indicated at their last meeting that they would need to raise interest rates soon unless there was more progress on bringing down inflation, minutes released Wednesday showed. “Many participants assessed that policy tightening would likely be necessary if inflation did not decline,” stated the summary of the meeting. “Some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2 percent.” Ultimately, the Federal Open Market Committee voted 9-3 to keep the federal funds rate targeted in a range between 3.5%-3.75%, where it has been all year. Those who voted against the decision favored a quarter percentage point increase. Minutes indicated that the dissenters “judged that doing so would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage.”
