This week saw a slight dip in mortgage interest rates, with the Federal Reserve maintaining short-term rates while hinting at a possible cut in the fall.
The average interest rate on a 30-year fixed-rate mortgage fell to 6.86% in the week ending June 18, according to Zillow data reported to BW. This marks a decrease of eight basis points, with a basis point representing one one-hundredth of a percentage point.
Despite the recent stability in mortgage rates, the 30-year mortgage has remained above 6.75% since late March, briefly spiking to 7.07% in May for a three-week period.
Federal Reserve Holds Rates Steady
The Federal Reserve has refrained from adjusting short-term interest rates throughout this year, including at its June meeting. The Fed indicated that it will monitor inflation and employment trends to guide its future rate decisions.
Historically, the central bank raises rates in response to high inflation and lowers them during periods of elevated unemployment. With uncertainties surrounding trade policies and inflation, the Fed’s next move remains uncertain.
If tariffs lead to a temporary price increase, the Fed may opt for one or two rate cuts in 2025. However, persistent inflation could deter any rate cuts this year.
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Fed Takes a Cautious Approach
Economists suggest that the Federal Reserve will proceed cautiously with rate cuts, likely making a move later in the year, possibly in September or December. The Fed is expected to assess the impact of trade policies on economic indicators before implementing any changes.
Amidst this period of stability and uncertainty, mortgage rates are anticipated to remain within a narrow range until a clear economic trend emerges, whether towards increased inflation or higher unemployment rates.
Housing Market Shifts
With elevated mortgage rates and home prices, the housing market has seen a slowdown in sales, coupled with a rise in inventory levels. Buyers now have more options and bargaining power, with sellers adjusting their prices accordingly.
In May, active listings for existing homes increased by 32% compared to the previous year, with homes staying on the market for a slightly longer duration. This shift indicates a more balanced market where buyers are gaining leverage.
As a result, the median asking price for existing homes has seen minimal growth, reflecting the changing dynamics of supply and demand in the housing sector.