Futures markets are also expecting a rate cut. Investors peg the chances of a quarter-point interest rate cut at nearly 96%, according to the CME FedWatch Tool, a measure of market sentiment.

New economic data releases could increase mortgage rate volatility in the coming weeks, leading up to the Fed's September meeting.

A Federal Reserve interest rate cut in September, the first this year, followed perhaps by another before year-end remains the base forecast for most economists polled by Reuters amid rising concerns about the health of the world's biggest economy.