Weekly Mortgage Rates Decline, Following the Rate of Inflation


Mortgage rates fell in the week ending July 11, with fixed rates seeing their largest week-over-week drop since May.

The 30-year fixed-rate mortgage averaged 6.77%, down 17 basis points from the previous week’s average, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

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As inflation cools, so should interest rates

On July 11, the Bureau of Labor Statistics released an encouraging consumer price index (CPI) report, which measures the changes in price of consumer goods and services. This key indicator of the rate of inflation is something that the Federal Reserve takes into serious consideration when determining what to do about interest rates.

Throughout 2024, the Fed has been repeating some version of the same message: When inflation gets better, we can talk about cutting rates. Much to the chagrin of prospective home buyers, the Fed has consistently elected to hold rates steady throughout the year. This has kept mortgage rates elevated as home prices have continued to rise, contributing to an increasingly unaffordable real estate market for many shoppers.

This latest report indicates that the CPI fell 0.1% from May to June, and the “core CPI” — which removes food and energy prices from the equation, as these are more volatile areas of the economy — shows that inflation has slowed to 3.3%, its lowest yearly rate in over three years. This is just the kind of “good data” that the Fed needs to justify cutting rates.

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The Fed keeps its cards close to the chest

While home shoppers can rejoice in the news that a cut may (emphasis on that word) be coming in the fall, Federal Reserve Chair Jerome Powell was reserved in his testimony before the Senate Committee on Banking, Housing and Urban Affairs on July 9.

“We continue to make decisions meeting by meeting,” he said, noting that loosening the policy restraints too quickly or too much “could stall or even reverse the progress that we’ve seen.” At the same time, failing to lower rates or reacting too conservatively on them could alternatively weaken employment and the economy. The next meeting of the Federal Open Market Committee will take place on July 30-31.

The Fed isn’t the only body that likes to see positive economic data. Even without intervention by central bankers, rates are affected by market sentiment. If coming reports continue to show that inflation is slowing, borrowers could see mortgage rates slip here and there even before we get a formal cut to the federal funds rate.



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