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Interest rates

Mortgage Rates Expected to Trend Down as Fed Cuts Loom

Strategic Insights

— 2 min read

Mortgage rates have dropped to their lowest point since January 2024, with 30-year rates averaging 6.28%. The Federal Reserve has indicated that a cut in the federal funds rate could be on the table at its September meeting, which is now a near certainty following a weaker-than-expected jobs report. This has sparked hopes among borrowers that rates will continue to trend down in the coming weeks.

Key Takeaways:

  • A 50-basis-point cut in the federal funds rate is now more likely than a 25-basis-point cut, according to the CME FedWatch Tool.
  • Mortgage rates are expected to trend down as investors expect the Fed to cut rates, which will put downward pressure on borrowing costs.
  • Borrowers could see rates drop further in the coming weeks as the Fed's next meeting approaches.
  • A home equity line of credit (HELOC) may be a good option for homeowners looking to tap into their home's value to cover a big purchase.
  • Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
  • Mortgage rates do not directly track the federal funds rate, but they are often influenced by how investors expect the Fed's moves to impact the broader economy.
  • The Consumer Price Index has slowed down significantly over the past year, from 9.1% in 2022 to 3.0% in 2024, which is expected to lead to further cuts in the federal funds rate and subsequently lower mortgage rates.
  • Home prices are not expected to drop anytime soon due to extremely limited supply, and are instead expected to rise this year as mortgage rates drop.
  • Fixed-rate mortgages lock in the rate for the entire life of the loan, while adjustable-rate mortgages lock in the rate for the initial period and then adjust periodically.
  • Borrowers should carefully consider which type of mortgage is best for them, taking into account their budget, financial situation, and plans for the future.

Statistics:

  • The Consumer Price Index has risen by 3.0% over the past 12 months, a significant slowdown from its peak of 9.1% in 2022 (Source: Business Insider).
  • The federal funds rate has not been cut in over a year, and a cut is now a near certainty following a weaker-than-expected jobs report (Source: CME FedWatch Tool).
  • 30-year mortgage rates have dropped to their lowest point since January 2024, with an average rate of 6.28% (Source: Zillow).
  • The CME FedWatch Tool indicates that a 50-basis-point cut in the federal funds rate is now more likely than a 25-basis-point cut (Source: CME FedWatch Tool).
  • Home prices are expected to rise this year, with Fannie Mae researchers predicting a 6.1% increase and the Mortgage Bankers Association predicting a 4.5% increase (Source: Fannie Mae and Mortgage Bankers Association).

Sources:

  • Business Insider
  • Zillow
  • CME FedWatch Tool
  • Fannie Mae
  • Mortgage Bankers Association

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