Cooling Inflation: Could It Mean Lower Mortgage Rates Soon?

Good news on the inflation front has many wondering if lower mortgage rates might be around the corner.

The latest numbers from the Labor Department show that inflation dropped to 3% in June, down from 3.3% in May. This marks the third month in a row that inflation has fallen, thanks to lower petrol prices and housing costs.

For families feeling the pinch from high prices over the past few years, this decline offers a bit of relief. Notably, the core consumer price index, which leaves out the more volatile food and energy prices, only edged up by 0.1%—its smallest increase in nearly three years. This suggests that the underlying inflation pressures are cooling off.

Prices for air travel, hotels, and both new and used cars also went down, which is another sign that inflation is easing. This has led traders and economists to believe that the Federal Reserve might start cutting interest rates as soon as September.

Even Fed Chair Jerome Powell mentioned in a recent congressional hearing that the labor market seems to be finding its balance after a strong start to the year.

Last year, the Fed aggressively raised interest rates to tackle inflation which soared to a peak of 9.1%. While inflation has come down significantly since then, it's still not low enough for the Fed to slash rates from their current 23-year high. However, the Fed’s recent economic projections, known as the “dot plot,” suggest we might see at least one rate cut by the end of the year.

So, what does this mean for you? If you're looking to buy a home or have an adjustable-rate mortgage, lower interest rates could translate to lower monthly payments. Did you know that there are other ways to save money now on your mortgage rate? Contact us to explore your home loan options.