Anticipated Decrease in July Mortgage Interest Rates
July is expected to bring a slight decline in mortgage interest rates as inflation eases.
This downward trend in rates is not drastic but rather resembles a gentle slope, akin to the uneven floor of an old house where a rolling marble moves slowly.
It appears that mortgage rates reached their peak for the year in May. The 30-year fixed-rate mortgage averaged 7.22% in the first week of May, dropping to 6.86% by the end of June, according to Freddie Mac’s weekly survey.
The gradual decrease in rates correlates with diminishing inflation. As the core consumer price index fell from 3.8% to 3.4% from March to May, mortgage rates tend to follow suit. If inflation continues to subside, mortgage rates may continue to decrease.
Federal Reserve’s Monitoring of Inflation
The Federal Reserve aims to lower the inflation rate to 2%. After raising short-term interest rates by 5.25 percentage points in 2022 and 2023, resulting in a decline in inflation, progress stalled in early 2024, prompting the Fed to delay rate cuts.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, noted positive signs in recent inflation data, indicating a favorable trajectory.
Bostic expressed optimism that inflation may decrease sufficiently to warrant a rate cut in the final quarter of 2024, although no guarantees are made.
Impact of Rate Cuts on Affordability
A decrease in mortgage rates may not necessarily translate to increased affordability for potential homebuyers. Despite falling rates, the median home resale price reached a record high in May, making homes less accessible.
With high costs and a decline in home sales, the inventory of existing homes for sale is increasing, potentially leading to softened prices, according to industry experts.
Forecasts by Fannie Mae and Mortgage Bankers Association
Fannie Mae and the Mortgage Bankers Association anticipate a decline in mortgage rates in the upcoming quarter, with the 30-year mortgage rate projected to average 6.8% from July to September.
June Mortgage Rate Trends
In June, the average 30-year mortgage rate decreased to 6.82% from 7.01% in May, influenced by factors such as the consumer price index coming in lower than expected.