“I asked a German girl if Germans are afraid of numbers. She said 9!” Numbers make up the bond market, and a steeper yield curve (the difference between short-term rates and long-term rates… steeper = more of a difference) tends to help banks and credit unions since they are paying less on deposits and can lend the money out at a higher spread. Brokers and independent mortgage banks aren’t fans, however, as they tend to be beat up (a technical term) by borrowers doing comparison shopping. Unfortunately for any mortgage loan originator, comparing renting and ownership isn’t going so well. Ownership costs like insurance, property taxes, and assessments for condos are going up, while rents are not. Realtor.com reports that median rents declined YOY for the 23rd straight month. Median rents are about 2.7% below their 2022 peak, so rents have basically flatlined. Rents have increased on a YTD basis, however that might be nothing more than normal seasonality. The current median asking rent is $1,711. (Today’s podcast can be found here and this week’s is sponsored by FirstClose. FirstClose provides fintech solutions to HELOC and mortgage lenders nationwide, increases profitability, and reduces costs for mortgage lenders through systems and relationships that enable lenders to assist borrowers more effectively and ultimately shorten closing times. Hear an interview with NEXA’s Mike Kortas on the advantages of the wholesale channel, the evolving needs of borrowers, and how technology will change the scope of employment in the mortgage industry.)

Mortgage application activity eased last week, but not in a statistically significant way.  One might be inclined to note a very slight uptick in mortgage rates, but it’s just as fair to say that rates held steady near longer-term lows.  The Mortgage Bankers Association’s weekly survey showed a 1.4% decline in the seasonally adjusted Composite Index for the week ending August 15, 2025. “Mortgage rates increased slightly last week, with the 30-year fixed rate now at 6.68 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. VA applications fell 16%, while FHA refinance applications increased as FHA rates remained comparatively competitive. The Refinance Index decreased 3% week-over-week but remains about 23% higher than the same week a year ago. The Purchase Index was essentially flat (+0.1% seasonally adjusted) and is running about 23% ahead of last year’s level. The refinance share of total mortgage applications slipped to 46.1%. ARM share decreased to 8.6%. FHA share rose to 19.1%, while VA share declined to 13.4%. Mortgage Rate Summary:
30yr Fixed: 6.68% (from 6.67%) | Points: 0.60 (down from 0.64)
15yr Fixed: 5.96% (from 5.93%) | Points: 0.70 (up from 0.63)
Jumbo 30yr: 6.64% (from 6.70%) | Points: 0.60 (up from 0.56)
FHA: 6.39% (from 6.40%) | Points: 0.66 (down from 0.77)
5/1 ARM: 6.01% (from 5.80%) | Points: 0.63 (down from 0.67)

New residential construction increased 5.2% last month to an annualized rate of 1.43 million homes, according to government figures released Tuesday.

Senate Banking Committee Chairman Tim Scott, R-S.C., asked crypto firms to keep spending in elections, and said that they “literally” put Bernie Moreno, Sherrod Brown’s successor in Ohio, in the Senate.

Fed Vice Chair for Supervision Michelle Bowman warned that focusing too much on technology risks could make banks lose relevance with customers.

Fannie Mae economists toned down their housing and economic outlook in August, predicting fewer home sales and less mortgage origination volume versus July.

Home Depot Inc. sales returned to growth in the second quarter as shoppers invested in smaller projects, such as lighting and gardening.

Builder sentiment remains deeply subdued, as the National Association of Home Builders (NAHB) and Wells Fargo’s Housing Market Index (HMI) dipped one point in August to 32—its 16th straight month below the key 50 mark, and matching the lowest level since December 2022.
Current sales conditions fell one point to 35
Sales expectations for the next 6 months remained steady at 43
Buyer traffic ticked up two points to 22
High mortgage rates (hovering around 6.58%), elevated new-home prices, and affordability pressures continue to weigh heavily on builder sentiment. In August, 37% of builders reported price cuts averaging 5%, while 66% offered sales incentives—the highest share seen in the post-COVID era. Affordability and demand remain persistent challenges, and despite slight improvements in buyer traffic, the overall outlook remains weak. Builders are leaning more on incentives than confidence to attract buyers. Regionally, confidence was weakest in the West, where affordability pressures are most acute and sentiment fell to its lowest since late 2022. The South also declined but continues to hover near the national average, while the Midwest held steadier and the Northeast was little changed. The divergence highlights that high-cost markets are bearing the brunt of buyer hesitation, while lower-cost regions remain relatively more resilient.

Mortgage rates are based on bonds and bonds, and bonds have some seasonality to them.  This doesn’t necessarily mean there’s a reliable seasonal pattern for the direction of rate movement.  Rather, it means that several weeks in August tend to be fairly forgettable in terms of excitement, volatility, and methodical movement.  The 2 most recent weeks arguably fit that bill.  Bonds (and, thus, rates) are still operating in the range seen in the 24 hours following the August 1st jobs report.  Mortgage rates have been in an even narrower range than the broader bond market.  For example, 10yr Treasury yields (often viewed as a benchmark for mortgage rate movement) are well over halfway back up to the levels seen before the jobs report.  Mortgage rates, meanwhile, aren’t even a quarter of the way back. Specifically, 10yr yields were around 4.40% and fell to around 4.20% after the jobs report.  They’re now back up to 4.30% and were as high as 4.35% yesterday.   Mortgage rates were 6.75% before the jobs report and fell as low as 6.53% afterward.  They’re at 6.59% today (top tier scenario, average). There have been no major influences for rates so far this week and there aren’t any major threats on the calendar of scheduled events until Friday at the earliest.  This doesn’t mean rates can’t move until then, only that they are not going to be moving in response to scheduled economic data.

Slow, Steady, Modest Improvement

Bonds are in the throes of the summertime “blahs.” In other words, excitement and high-conviction trading are in short supply. Instead, prices and yields are drifting in a broadly sideways path with minimal day to day movement. Motivations are non-existent and the numbers on the screen are incidental byproducts of non-data-driven hedging and position squaring.  It’s easier to just say “the blahs.”  Thankfully, the blahs aren’t always bad.  Today’s blah were pretty OK with 10yr yields hitting the 3pm close with a few bps of improvement and MBS holding a 1 tick (.03) improvement for most of the day. Motivations remain in short supply in the near term.  Wednesday’s Fed Minutes won’t have any revelations that haven’t already come to light in Fed speeches. Powell’s Friday speech at Jackson Hole is the only scheduled event with teeth, and those teeth are nowhere near as sharp as something like the jobs report.

Econ Data / Events

Building Permits (Jul)

1.354M vs 1.39M f’cast, 1.393M prev

Housing Starts (Jul)

1.428M vs 1.29M f’cast, 1.321M prev

Market Movement Recap

09:30 AM modestly stronger overnight.  10yr down 1.7bps at 4.319. MBS up 1 tick (.03)

12:51 PM 10yr down 2.7bps at 4.309 and MBS still up 1 tick (.03)

04:10 PM 10yr down 2.9bps at 4.307.  MBS still up 1 tick (.03).