Mortgage Rates Update: August 21st, 2025

This week’s mortgage market update reflects stability in lending costs, even as Treasury yields edged higher. Economist Bill Knudson underscores how spreads remain above historic norms, signaling continued caution from lenders despite steady inflation.

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For a $100,000 loan at 6.58%, the monthly payment decreased by $3 is $637.

Upcoming releases:

• The next new jobs report is Sept 5

  
  

• The next CPI release is Sept 11. 

• The next Fed meeting is Sept 17

Mortgage Rates Update: August 21st, 2025

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Key Developments

• Mortgage Rates Hold Steady:

  • The 30-year fixed rate remained unchanged at 6.58%.

  • A $100,000 loan carries a monthly payment of $637, with about 61% of the payment allocated to interest.

• Borrower Affordability Metrics:

  • Net monthly interest expense: $384.

  • Income required to qualify: $27,315, with a multiplier of 3.7x.

• Yield Spread:

  • The spread between the 30-year mortgage and the 10-year Treasury narrowed by 4bp to 229bp.

  • This remains 57bp above the long-term average (168bp), representing a sizable “safety cushion” for lenders.

• Market Context:

  • CPI held steady at 2.7% in July.

  • The 10-year Treasury yield rose 4bp to 4.33%.

Knudson’s Perspective

Knudson interprets this week’s results as a classic case of lender conservatism. Even though mortgage rates held steady, spreads remain wide compared to history, reflecting embedded risk premiums. He expects moderation toward the 2.5%–3% inflation band will gradually narrow spreads, offering future relief for borrowers. Until then, stability in mortgage rates reflects a market hedging against uncertainty rather than signaling true comfort.