Update 07/31/2025: Fed Freeze, Historic Dissent & a Sub-7% Mortgage Window

📈 This week on The Pulse and Perspective, host Peter D’Angelo unpacks a blockbuster Fed meeting that delivered zero rate movement—but plenty of drama. Two governors broke ranks for the first time since 1993, voting for an immediate cut. What does that rare dissent mean for September’s decision and your borrowing costs?

🏠 Meanwhile, 30-year mortgage rates are hovering just under 7 percent—the lowest band of 2025 so far—and applications have already jumped nearly 10 percent. National inventory is up 17 percent year-over-year, yet one in three sellers is slashing prices to lure buyers. Is the leverage finally shifting?

📰 Peter breaks down:

• Powell’s “patient” stance and why tariffs still loom large
• How a dissent at the Fed could foreshadow faster easing
• The upcoming jobs report and PCE inflation gauge that could jolt markets
• Why Fannie Mae now pegs year-end rates near 6.4 percent—not the 4-5 percent dream
• Tactical tips for buyers, sellers and loan pros as algorithms amplify summer volatility

Tune in for sharp insights, context you can act on, and Peter’s take on whether we’re about to punch through this year’s rate floor.

🎧 Listen now and stay ahead of the curve!

#MortgageRates 📉 #FedWatch 🏦 #HousingMarket #RealEstate #HomeBuying #InterestRates #EconomicUpdate #MortgageNews

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Peter D'Angelo | NMLS: 885309 | Branch Manager | Guaranteed Rate, Inc., NMLS 2611
Peter.DAngelo@Rate.com

*All information, topics, discussion is my own personal opinion and insight, not reflective of Guaranteed Rate, Inc. May contain market information for informational purposes only, not to be used as financial advice.

Transcript

Podcast_07.31.2025-UPDATE

 [00:00:00] 

Welcome back to the Pulse End perspective. I am your host, Pete DeAngelo with your weekly mortgage market update. We have a little bit to talk about today. The Fed said exactly what we expected. They did not move their interest rates. We are still seeing that the Federal Reserve is remaining cautious because they don't wanna stoke the flames of inflation.

So what did Fed Chair Jerome Powell communicate yesterday? First and foremost, they kept their policy rate the same. It's currently at 4.25% to four point a half percent, and the forward looking comments are that they're going to still remain.

Dependent [00:01:00] on the data, particularly when they look at inflation and the labor market. Powell's messaging emphasized patients. They are taking a patient approach because they do not wanna put themselves in a position where they lower their policy rate and then inflation ramps back up. Especially because tariffs are still this variable.

That's part of the equation that. Is having an impact based on Fed chair Jerome Powell's responses to reporters. Yesterday when he held his press conference, it was a little bit of a mixed signaling because they don't know. What the tangible impacts are and how much they can weigh the data that they look at compared to the headlines of what's been going on with tariffs and the impact it's going to be having and maybe has had on inflation and GDP, the overall health of the economy.

There's a very important part about what happened yesterday, something historic that hasn't happened since [00:02:00] 1993. There was dissent among the Fed chair. The Fed Governors, as I mentioned last week, the Federal Reserve is comprised of a number of members, and they sit at the table to discuss the decision making on the policy.

Well, two of the Fed Governors were in favor of a quarter percent decrease on the Fed fund rate. This is the first time that that's happened since 1993. There is a dissident to quote Pearl Jam. Dissidents here is an indication that I will now insert a little bit more of my opinion than I normally do.

If we rewind the clock to last year. The last Fed meeting in July, they kept their policy rate the same. They don't meet in August, so that means that their next meeting is September. That means two, possibly two data reports for the labor [00:03:00] market and some inflation reports. We may get two in that gap and based upon what Fed chair Jerome Powell says in the conference like last, last year, the market is going to anticipate.

What they're going to do, and that's what created a different rate environment last year, not what the Fed actually did. What happened last year, we received a report from the Bureau of Labor and Statistics that they had made a miscalculation on the jobs numbers. There's we're talking about job openings, labor turnover.

They overestimated. 880,000 jobs over a 12 month period from 2023 to 2024. The market reaction was, whoa. Let's put this into perspective. The Federal Reserve has mentioned that they're looking very intently at how the job market is, and the job market looks stable, so they didn't have a reason to cut their policy rate.

When that [00:04:00] revision hit, everyone expected interest rates to come down and maybe come down a little more quickly. In August, we had one of the best rate environments that we saw in 2024. The Fed didn't say a word. They were not meeting. That's when we had our lowest interest rates. My perspective now of taking learning from that, now putting that into context here, I think two of our Fed governors may be wanting to have the opportunity to say, I told you so.

Because there could be softening in the labor market. They have to remain dependent on data and the quality of that data. Is getting a little bit more difficult to determine because so much is changing in this ever-changing world right now. And some of the more, legacy data providers and surveys may not be giving us as accurate of a representation as they used to in the past.

So with that said, two Fed Governors, [00:05:00] they happen to have been appointed by the current administration in Washington. They are in favor of quarter point cuts. However, the consensus was still that they're keeping the policy rate the same, so it is staying the same for now. This will be very important for us to take a look at when we get into September, and also when we take a look at how the market changes possibly over the next couple weeks and into August.

With that being said, there's some important data that is going to be provided immediately after the Fed met this past Wednesday. First and foremost, this Friday we're gonna have a jobs report. They talked about labor a lot in the conference, and when Fed chair Jerome Powell was responding to reporters and held his press conference after the meeting, that is going to be part of the calculus here.

Also, we're going to have an inflation report, within the next week we're going to get the personal consumption expenditure the personal consumption expenditure isn't just any inflation [00:06:00] gauge.

It is the Fed's preferred inflation gauge. So we're gonna have to see what that looks like. Where are they at right now? They're averaging between 6.7, 6.9%, based upon a number of data sources available to us today.

With that, there was a little bit of a dip, but then the rates came up a little bit after the fed meeting and some of the comments from Jerome Powell. We're staying range bound. We're still staying underneath 7%, which is nice, but we've really been keeping interest rates for the most part this year, within a quarter of a percent, maybe 0.3% throughout the whole year.

However, we are seeing currently some of the lowest interest rates that we've seen this year. So we are on the low end of where 30 year fixed rate mortgages have been this year with respect to the Fed and this data that's going to be coming out. I wanna remind everyone about what happened last year beyond what we just reviewed.

After the Fed did meet in September for the next three meetings, they cut their [00:07:00] policy rate. They came out swinging with a half a percent cut, and then the two subsequent meetings, they had a quarter percent, quarter percent totaling one whole percent lower, which is where we have arrived and where we've been at 4.25 to 4.5% for the Fed fund rate.

Need to bust the myth. The Fed fund rate does not actually set the stage and that is 100% correlated to 30 year mortgage rates. It is part of the consideration. It does support what is going to happen for mortgage rates, but it is not exclusive, mutually exclusive. In that time where we saw 1% reduction on the Fed fund rate, we did see mortgage rates go up about a half a percent.

Counterintuitive, you may say yes, but the market is speculative. It is not basing it 100% on what is happening now. People are gonna be paying mortgages back for a prescribed amount of time into the future. So it's anticipatory, when we start getting the data over the next month and a half, until we see the next fed [00:08:00] meeting, we're going to have the market reacting to the data points with a little bit more sensitivity.

And then we have to also compound that by the realist realistic approach that the market. Is being run by algorithms for the most part in the summertime. This is his customary. Ever since technology's reached the level that it has, we have been noticing that there are little swings in the market that become big swings because algorithms are programmed a specific way, 

when considering larger SWAT swaths of data, especially considering that you have AI available now and larger data sets are able to be analyzed and interpreted very quickly. So these systems are getting more complex, but what it is doing is when someone's not actively engaged at the wheel and we're on autopilot, well, autopilot can make decisions one way or the other that can otherwise maybe wouldn't have been a big swing, could be.

So over the past two years, this has been a [00:09:00] good time to see interest rates come down, and right now I'm gonna tell you this, if the labor starts to show cooling, which it already kind of did this week. We did see, a miss on one of the labor reports that showed less job openings than was expected. And that shows softening.

We need to see trends for the Fed to do anything 'cause they're gonna continue to remain cautious here. But that's important for us. And if we see that consistent for the next two months, you're gonna have lower interest rates. How much lower? Remains to be seen, but it is possible we have an opportunity within the next 45 days for us to break the floor of where the lowest interest rates have been this year, going into September.

So we'll be keeping an eye out for that. I may do a special episode, a little breaking news if I start seeing that. 'cause I want you to be able to take advantage of that if it does occur. More commentary on mortgage applications right now. They did see a 9.7% increase week [00:10:00] over week because of that little bit of improvement and also the summertime squarely here in July.

Families planning to move, they want to do it before the school year starts. Historically, this is a common time where we see a little bit of a bump up. I think that was exacerbated by a slightly improved interest rate environment over the past couple weeks. Looking out a little bit further on the mortgage rates.

Fannie Mae expects by the end of 2025 for interest rates to land somewhere in the 6.4% range. It's a not going to be into the fives, barring something coming out of left field. I always like to say that we can't make. Hard and fast projections. While the market is speculating so much and there's so much that's up in the air, we're in unprecedented times.

It's important to make note of that this isn't a quote normal market. This is a market that is [00:11:00] heavily dependent on the interest rate policies of a government. It's Federal Reserve, the US. That's not how a market freely operates. So these are the things that we need to keep an eye on. And also with respect to mortgage rates, I've had some conversations over the past week and I think it bears repeating.

I do not believe mortgage rates are going to get into the fours. And even the low fives in the near future, unless something comes outta left field and happens to royal, the market where the federal reserve maybe for an emergency purpose needs to lower interest rates, or there's a flight to safety and a lot of money moves from the stock market into the bond market.

When the bond market yields go down, that's when we see mortgage rates also go down. Those are the scenarios that would. Create an environment of lower interest rates, but as it stands, if the situation remains this normal and hectic, we're not going to see interest rates reduce much further than I think where Fannie Mae is [00:12:00] saying around 6.4%.

Now moving on to take a look at the real estate market. Not much has happened. But one of the important things to note, looking at the whole nation, we are seeing an increase in inventory inventory's up 17% year over year. Right now, the sales trend is higher, but even though we're seeing a 17% increase year over year, one in three homes are dropping their prices.

That is. Indication of market change and market correction. That means sellers had a higher expectation for what their home would sell for, and they have to temper that. They actually have to lower their price in order to entice buyers. This is a national look. Zooming into New Jersey. This is happening in some markets.

It's not happening across the whole state, but it is still developing in some markets and it's happening in more markets as time goes on, but it's slower. The rest of [00:13:00] the country is giving us an indication, but here in New Jersey and also in ultra competitive markets, that is remaining the same. So it's, it's staying consistent.

It's still competitive in New Jersey. You still have to kind of give it your all, but it's no longer a case where even for me, in assisting the families that I do, I'm not thinking anymore about, oh yeah, you definitely gotta go 10% over list price if you wanna be competitive or 5%. You know, I leave that conversation to the, the trusted, amazing real estate professionals that I work with, 

buyers wanna pick my brain and I make sure that they understand. I don't want to overstep, I defer to your agent on this, but my opinion based on what I see, we don't have to be swinging for the fences with every offer, but it is dependent on what market you're shopping in. There are some markets that are still extremely competitive.

So that's our look and that's our update for this week. I hope you found this information helpful and useful. Keep an eye [00:14:00] out. For Monday's mortgage update, we're going to take a look at temporary buy downs versus permanent buy downs. We know that interest rates have not been providing affordability opportunity for us, so how can we create.

That affordability opportunity now, and especially when we look at the rest of the country and we see that there's a softening happening and home prices are being reduced. Let's talk now that you're a buyer that may have some leverage in your negotiating with a seller. Let's make sure that you get the most out of that so that you can be effective and realize the most savings, 

I hope you all have a wonderful weekend and take good care.