Buyers should keep an eye on the possibility of rate cuts in the next few months. Tharon Green/CNET
For the past several months, the average 30-year fixed mortgage rate has sat between 6.5% and 7%. Prospective homebuyers shouldn't hold their breath for that to change anytime soon.
On July 30, the Federal Reserve is expected to keep borrowing rates the same at its fifth monetary policy meeting this year. Although the central bank doesn't directly dictate mortgage rates, its policy decisions indirectly influence consumer borrowing costs, including for mortgages, over the long term.
Mortgage rates, which are primarily tied to 10-year Treasury yields in the bond market, are also sensitive to other factors, including investor outlook for future Fed moves. Economists will be closely listening to Fed Chair Jerome Powell's post-meeting remarks for any hints about rate cuts later this year.
"While the Fed isn't expected to cut rates, Powell's language will be crucial," said Logan Mohtashami, lead analyst at HousingWire.
Markets currently expect a Fed cut in September. If Powell indicates slow progress on inflation and ongoing economic uncertainty, that may keep the Fed in monitor mode this fall, and bond yields and mortgage rates could increase.
Ultimately, it's unlikely that mortgage rates will fall significantly outside the current range unless the economy slows significantly or unemployment increases sharply.
Affordability challenges and elevated mortgage rates have kept the housing market frozen for several years. Even as the long-standing housing shortage eases in several local markets and gives those buyers improved negotiating power, the rest remain locked out by steep home prices.
Why is the Fed holding off on interest rate cuts?
After inflation showed ongoing signs of slowing in late 2024, the Fed lowered rates three times, yet the picture is more complex this year.
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