Thu, Aug 21, 2025, 9:01 AM 3 min read
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Mortgage rates have dropped sharply since hitting 7.08% in May, pressured by a surging inventory of homes for sale. The 30-year mortgage fell to a 10-month low at 6.55% last week, adding to losses after a poor July jobs report stoked more economic uncertainty. The crosscurrents are slowly shifting buyer fatigue from affordability issues to tariff-fueled inflation.
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A new Bright MLS survey confirms weakening demand and deteriorating sentiment. It concludes both buyers and sellers are holding back and successful transactions are “more likely to be because people need to buy or sell, rather than that they want to buy or sell.” Nearly three-quarters of agency respondents reported at least one buyer who chose to pause their home search, compared to less than two-thirds at the same time last year.
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In addition, just 32% of buyers walking away did so because they were frustrated by failed offers, typical in a strong seller’s market. That percentage recorded a major drop from last year’s 56%. Affordability issues are also fading, with respondents citing “other financial issues” and “general uncertainty” more frequently, compared to 2024 when “affordability” and “high mortgage rates” dominated buyer worries.
On the other hand, prospective homebuyers must be thrilled to see mortgage rates finally headed lower. United Wholesale Mortgage (NYSE:UWMC) Chief Strategy Officer Alex Elezaj told MarketWatch this shape-shifting market is offering “lots of opportunity” for buyers and sellers and notes that cheaper mortgages will allow buyers to “afford more houses for their money.”
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Lower rates also allow homeowners looking to refinance to shorten their loan term and build principal at a faster rate. It has immediate benefits as well. Marketwatch offers the example of a $300,000 loan and 30-year fixed rate at 7.5%. Dropping the rate to the last week’s low would reduce the monthly payment from $2,100 to $1,900, saving over $2,000 per year.
