Buyers should keep an eye on the possibility of rate cuts in the next few months. Tharon Green/CNET
Mortgage market predictions have been clouded by economic uncertainty caused by the Trump administration's trade measures, deficit spending and geopolitical maneuvering. The big question hanging over the housing market is whether rates will rise due to tariff-induced inflation or fall due to a recession.
Since early spring, average mortgage rates for 30-year fixed loans have been swinging between 6.5% and 7%. Some weeks are volatile in the mortgage market, while others are steadier.
Interest rate cuts by the Federal Reserve could improve housing affordability over the long term, but the direction of mortgage rates ultimately depends on the bond market. Mortgage rates track the 10-year Treasury yield, which rises or falls depending on how inflation and labor data impact investor speculation.
If investors perceive higher risk, including from heightened military conflict, they often flock to "safe-haven" Treasury bonds, which can reduce long-term yields and temporarily push mortgage rates lower.
The Mortgage Bankers Association now predicts that mortgage rates will decline only slightly to 6.7% by the end of the year. Any downward trend in home loan rates could bring more buyers off the sidelines.
"You'd need to see mortgage rates pretty far below current levels, certainly below 6.75%, to incentivize homebuyers," said Beth Ann Bovino, chief economist at U.S. Bank.
CNET
How will Fed rate cuts impact mortgage rates?
The Federal Reserve is responsible for ensuring full employment and controlling inflation, mainly by setting short-term interest rates for banks. While a weak economy typically calls for interest rate cuts to boost growth, reducing rates too quickly could worsen inflation if it's already too high.
... continue reading