The average 30-year fixed-rate mortgage dropped to 6.62% on Thursday, a new low for 2024 that appears to be tied to the expectation that the Federal Reserve could move to cut interest rates at its next meeting in September. This is according to data reported by Mortgage News Daily.
On Wednesday, Fed Chair Jerome Powell indicated that a rate cut is a possibility after the September meeting if economic data continues to trend in the right direction.
“If we were to see, for example, inflation moving down quickly, or more or less in line with expectations … and the labor market remains consistent with its current condition, then I would think that a rate cut could be on the table at the September meeting,“ Powell said.
The central bank has long targeted an annualized inflation rate of 2%, and current levels are trending in that direction. The Fed is under pressure to maintain rates long enough to cool the economy — but not so long that the labor market will be adversely affected. In concert with the inflation data, the Fed has indicated that it is monitoring the slight increase in the jobless rate.
The central bank is paying attention to “both sides of its dual mandate,” Powell said, referring to maximum employment and stable prices.
“Our confidence is growing because we’ve been getting good data,” Powell said. “It doesn’t look like an overheating economy. It looks like an economy that’s normalizing.”
Freddie Mac also pointed to the likelihood of a rate cut when commenting on the drop in mortgage rates, but it also called attention to consumer confidence issues stemming from ongoing affordability challenges.
“Expectations of a Fed rate cut coupled with signs of cooling inflation bode well for the market, but apprehension in consumer confidence may prevent an immediate uptick as affordability challenges remain top of mind,“ Freddie Mac chief economist Sam Khater said in a statement released Thursday. “Despite this, a recent moderation in home price growth and increases in housing inventory are a welcoming sign for potential homebuyers.”
