Mortgage Rates Drop Amid Weak Jobs Report, But Inflation Risks Loom

WASHINGTON, D.C. — A weak jobs report released last week has driven 30-year mortgage rates closer to the 6.5% range, according to recent market data, but economists caution that inflation risks could reverse this trend.

As of August 7, 2025, the 30-year fixed-rate mortgage averaged 6.63%, down from 6.72% the previous week, marking the lowest average since April 10, 2025. A different metric from another market analysis firm pegged the rate even lower at 6.55% on the same date.

The decline in mortgage rates comes as the U.S. Bureau of Labor Statistics reported a sluggish labor market in July, showing significant downward job revisions for May and June. Economists speculate that this data indicates cooling inflation, yet the future of mortgage rates remains uncertain.

“While both buyers and sellers welcome lower mortgage rates, it’s not clear whether rates will continue to fall,” said Lisa Sturtevant, chief economist at Bright MLS. “A weaker economy could lead to lower mortgage rates, but inflation risks could keep rates elevated.”

Chen Zhao, head of economics research at Redfin, described the current rates as a “window of opportunity” for serious homebuyers. “The anticipation of a rate cut has already pushed mortgage rates down, but there’s no guarantee they’ll fall further,” Zhao said.

The recent drop has triggered an increase in mortgage application activity. For the week ending August 1, applications were up 3.1%, driven by a 5% rise in refinance applications compared to the previous week. The Mortgage Bankers Association reported that the unadjusted Purchase Index was 18% higher than this time last year.

Despite this uptick, new tariffs from President Donald Trump are starting to affect consumer prices. Joel Berner, senior economist at Realtor.com, highlighted how builders face rising costs due to tariffs on materials like lumber and copper, further pushing construction prices up.

Market conditions are beginning to impact home sellers as inventory growth stalls. Mike Simonsen noted that “home sellers are getting tired of the sluggish market,” with many deciding to wait out the current situation as price trends weaken.

National home prices have remained mostly stagnant compared to last year, creating circumstances where prices might slightly decline by the end of 2025. Slowing price growth is reportedly boosting affordability, particularly in places like Oakland, California, where the necessary income for a median-priced home dropped by 4.6%.

Katie Shook, a Redfin Premier agent in Phoenix, stated that many sellers are offering up to $15,000 to cover buyers’ closing costs in order to facilitate sales. Trends show that buyers are less interested in extra features such as landscaped yards or pools, driving down premiums on these amenities.

With a backdrop of economic uncertainty, the housing market is poised for fluctuations. Several factors, including inflation and a potential shift in the Federal Reserve’s interest rate policy, will significantly influence mortgage rates in the coming weeks.