Mortgage rates are likely to keep falling in August because inflation is slowing down.
The pleasing news is that mortgage rates have been trending downward since they crested for the year in April, when the 30-year fixed-rate mortgage averaged 7.04% in NerdWallet’s daily survey. The average rate slipped slightly lower in May, then dropped again in June and yet again in July, when it averaged 6.74%. August could mark four months in a row of falling rates.
Mortgages respond to inflation. When prices rise uncomfortably fast, mortgage rates go up, too. That’s what happened from early 2022 to late 2023. Now inflation is easing and mortgage rates are slowly falling.
The Federal Reserve’s favored inflation gauge, the core personal consumption expenditures price index, dropped from 4.3% in June 2023 to 2.6% in June 2024, according to the latest data available. The Fed’s goal is to achieve an inflation rate of 2%, and inflation seems to be on its way there.
Fed officials say they’ll cut the short-term federal funds rate when they’re convinced that “inflation is moving sustainably toward 2%,” in the words of Fed Chair Jerome Powell to a Senate committee in early July.
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