Weekly Mortgage Rates Fall as Markets Drool Over Possible Fed Cut

This week saw a slight decrease in mortgage rates, continuing the downward trend as summer comes to a close.

The average rate for a 30-year fixed-rate mortgage dropped nine basis points to 6.59%, based on data from Zillow provided to BW. A basis point represents one one-hundredth of a percentage point.

While current mortgage rates may not be particularly impressive, they are among the lowest seen in the past five months.

Federal Reserve Chair Jerome Powell’s speech at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming, provided momentum for a rate cut. Powell’s focus on stable unemployment numbers amidst slowing job growth hinted at possible future rate adjustments.

Powell’s acknowledgment of rising risks to employment due to the labor market slowdown suggested a potential shift in the Fed’s policy stance towards lowering interest rates.

Market sentiment following Powell’s speech strongly indicates an expectation of a rate cut at the Fed’s upcoming meeting in September. The possibility of a quarter-point cut has generated significant anticipation among investors.

Following Powell’s cautious remarks, market expectations point towards a rate cut at the upcoming Fed meeting in September. The Fed has maintained the federal funds rate since December 2024, and the potential cut has been eagerly awaited by investors.

Market sentiment, as reflected in the CME FedWatch tool, now indicates an 87% probability of a September rate cut, up from 75% just a week ago. This anticipated quarter-point cut has generated significant interest in lower rates among market participants.

However, upcoming data releases before the September meeting, including the Personal Consumption Expenditures index and the August jobs report, will provide the Fed with additional insights into the economy, potentially influencing their decision.

A potential rate cut by the Fed could lead to lower short-term borrowing rates, while long-term loans like mortgages typically respond to market trends. The recent decrease in mortgage rates indicates that lenders may have already priced in the expected rate cut.

For individuals waiting for mortgage rates to decline, the current average rate on a 30-year fixed mortgage has already fallen significantly since the July Fed meeting. Additional insights from the Fed’s upcoming meeting in September could further impact mortgage rates in the future.