Mortgage Rates Hold Steady Amid Expected Fed Rate Cut in September

As of August 21, 2025, the U.S. mortgage market continues to experience high borrowing costs, with 5-year adjustable-rate mortgages (ARMs) averaging 7.32%, according to Zillow data [1]. This figure represents a slight increase from the 7.27% reported earlier in the month [4], signaling continued pressure on homebuyers and refinancers in the ARM segment. While ARMs make up approximately 8% of the overall mortgage market, the rising rates underscore the broader economic challenges impacting housing affordability [4].

The broader fixed-rate mortgage market shows a similarly elevated trend. The 30-year fixed-rate conforming mortgage averaged 6.597% [1], while jumbo mortgages stood at 6.706% in Texas and 6.69% nationally [3][5]. Rates have remained relatively stable over the past few days, with only minor fluctuations observed [6]. These numbers reflect a market still reeling from months of high interest rates and a Federal Reserve that has not yet begun its anticipated easing cycle.

Despite the near-certainty of a 25-basis-point rate cut by the Federal Open Market Committee (FOMC) on September 17, 2025, market expectations suggest that this move may not immediately translate to lower mortgage rates. According to CME Group data, the probability of a rate cut in September stands at approximately 85% [7]. However, the federal funds rate, which is the Fed’s primary policy tool, has little direct impact on long-term fixed-rate mortgages. Instead, mortgage rates are more closely tied to bond yields and economic data, particularly employment and inflation metrics.

Recent data, including a weak July jobs report, has already pushed 30-year fixed rates down by roughly 25 basis points over the past month [7]. This suggests that much of the expected relief from the Fed's potential rate cut is already priced into the market. Additionally, investor sentiment remains cautious, with a noticeable shift in capital toward safer assets like government bonds and mortgage-backed securities, which has contributed to the downward movement in yields and rates [7].

Looking ahead, the market will likely continue to focus on incoming economic data rather than on the Fed’s policy actions. The release of the August jobs report on September 5, 2025, could serve as a key turning point for mortgage rates. If further signs of economic weakness emerge, long-term rates may continue to decline. However, if economic data shows resilience, rates may stabilize or even rise.

For now, the ARM market remains a critical segment under scrutiny, as its sensitivity to rate fluctuations offers insight into broader market expectations. With 5-year and 7-year ARM rates at 7.27% and 7.45% respectively, the high borrowing costs are expected to continue influencing buyer behavior and refinancing activity [4].

Source:

[1] Current ARM mortgage rates report for Aug. 21, 2025 (https://fortune.com/article/current-arm-mortgage-rates-08-21-2025/)

[3] Current Texas Mortgage And Refinance Rates (https://www.forbes.com/advisor/mortgages/current-texas-rates/)

[4] 5-Year ARM Rates Rise to 7.27% as U.S. Housing Market ... (https://www.ainvest.com/news/5-year-arm-rates-rise-7-27-housing-market-faces-persistent-high-borrowing-costs-2508/)

[5] Mortgage Rates Today: August 19, 2025 (https://www.forbes.com/advisor/mortgages/mortgage-rates-08-19-25/)

[6] Compare Today's Mortgage and Refinance Rates in Texas (https://www.nerdwallet.com/mortgages/mortgage-rates/texas)

[7] Don't Circle September 17th on Your Calendar as ... (https://www.thetruthaboutmortgage.com/dont-circle-september-17th-on-your-calendar-as-mortgage-rate-drop-day/)