Housing Economy

Inflation Just Fell. Will Mortgage Rates Follow?

The Bureau of Labor Statistics announced a slight drop in the inflation rate for April. Though minimal, the reported drop came down to 3.4% from 3.5% in March. It’s important to keep in mind that the rate is still well above the Federal Reserve’s 2% target, however, any drop is welcome news, especially for those looking to purchase a new home.

With mortgage rates at their highest point in decades, this drop in inflation has many wondering if mortgage rates will soon be following. CBS News provided us with a breakdown on what to know in light of these new developments.

According to CBS News, While a drop in inflation won’t necessarily cause mortgage interest rates to drop dramatically, it won’t hurt. However, these rates are largely influenced by the federal funds rate, which has remained stuck at a 23-year high since last summer. Since the latest inflation rate is only marginally improved, then, it’s unlikely that the Federal Reserve will lower their rate, so expect mortgage rates to remain around where they are now.

That noted, the Fed doesn’t directly dictate what lenders offer borrowers. And if lenders think the federal funds rate may soon be cut, as it could be if inflation continues to cool, they may get ahead of that by offering slightly lower interest rates to borrowers right now. But a bigger cut that’s likely to remain consistently low will only come when the Fed acts. Still, mortgage rates change daily, and if buyers look to lock in a rate today — or this week — they’ll likely be better served than if they waited for the next big financial news cycle. 

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