Mortgage rates have been on an incredible run lately, reversing all the uncertainty and turmoil of the past 52 weeks.
Rates are just about back to the lows seen last September/October, and could move even lower for the remainder of the year.
It seemed impossible just a couple weeks ago and now seems almost probable, that mortgage rates could dip into the fives before the end of 2025.
That just happens to be where my 2025 mortgage rate predictions put the 30-year fixed (I made that forecast last December).
However, the biggest headwind is now inflation, which continues to rear its ugly head and might not be over just yet.
For Mortgage Rates It’s Now Inflation vs. Unemployment
It’s basically a battle between inflation and unemployment at this point. Except things have kind of flip-flopped.
As recently as July, I said it was all eyes on labor when it came to mortgage rates. That was after “we beat inflation.”
And it was because labor continued to look pretty resilient up until the July jobs report.
The keyword there is look though, because after scores of revisions and another dismal jobs report, it’s clear it looked a lot better than it was/is in reality.
The icing on the cake was the annual revision from the BLS which showed 911,000 fewer jobs created between March 2024 and 2025.
That’s on top of the two consecutive weak jobs reports we just received, which included tons of downward revisions as well.
So now labor looks as if it’s finally breaking, which is great for mortgage rates and largely why they are where they are today.
But there’s a lot of talk about inflation not being done yet, and that’s possibly the biggest risk to mortgage rates moving forward.
That’s basically the one thing that can get in the way of an even lower 30-year fixed.
If the CPI report (next release is tomorrow) shows that consumer prices are rising again, we could have a problem.
The Lower Mortgage Rates Go, the Harder It Is for Them to Fall Even More
The issue now is that mortgage rates have already fallen a lot this year, so they could pop back up at a moment’s notice.
The old cliché is true. Mortgage rates rise a lot more quickly than they fall.
So if you’re watching mortgage rates for the rest of the year, keep a close eye on anything to do with inflation.
This includes the CPI report, the PPI report, and the PCE report, which is the Fed’s preferred inflation gauge.
These are the things you want to pay attention to assuming labor data continues to stay on (weak) trend.
The Fed is going to cut rates regardless, which will help short-term rates, but you need calm inflation if you want to get long-term rates down as well.
And that’s ultimately what drives 30 year fixed mortgage rates.
Long story short, you want calm (or reduced) inflation and more of this cold labor stuff for mortgage rates to come down even more.
The one issue now is because the bar is so low for labor, it won’t take much for a so-called “hot” report to come in and beat expectations.
Think of it this way; if the next forecast calls for a tiny amount of job creation, it will get easier to meet or beat those expectations.
So there is the risk that even labor could surprise in a way that hurts mortgage rates.
But given the trend lately, I would be more focused on inflation with regard to rates possibly moving higher.
I keep hearing rumblings of prices on everything being more expensive, kind of a throwback to a year or two ago.
It’s unclear if these are just anecdotes, or if inflation is indeed ramping up again.
Part of me wonders if it’s a combination of the tariff stuff combined with more companies finally playing catch-up and raising their prices.
But we’ll have to see the data to prove that, not just stories from people going to overpriced restaurants.
To summarize, it appears that we have beaten labor to a pulp, and the only thing that can stand in mortgage rates’ way (again) is inflation.
(photo: Marcin Wichary)
- Mortgage Rates Biggest Headwind Is Inflation Again - September 10, 2025
- The Fed Cutting Rates Is a Good Marketing Opportunity for Mortgage Loan Originators - September 10, 2025
- Chase Launches Limited Time Sale on Mortgage Refinances - September 8, 2025