Mortgage rates mostly drifted downward throughout July, and that trend continued the week ending Aug. 1.
The 30-year fixed-rate mortgage averaged 6.6%, down nine basis points from the previous week’s average, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.
Anticipation of the Federal Reserve shifting into a rate-cutting phase has led mortgage lenders to soften rates, giving us the lowest weekly average for the 30-year fixed rate since early February.
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No Fed rate cut yet
Yesterday, as predicted, the Federal Reserve held the federal funds rate steady. That short-term lending rate has now been at the same level for a solid year, as the Fed’s final hike of that cycle was at last year’s July meeting.
But there’s considerable optimism that the Fed will move into a rate-cutting cycle beginning with their next meeting on Sept. 17-18. Though Chair Jerome Powell was characteristically cautious in prepared remarks following the meeting, he hinted strongly that cuts could come soon.
“We have made no decisions about future meetings, and that includes the September meeting,” Powell told reporters. But he did note that “a reduction in our policy rate could be on the table as soon as the next meeting in September.”
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Don’t wait for lower rates
A September cut isn’t likely to be an instant game changer, even if it does signal a shift to a rate-cutting phase. For one, markets currently anticipate a 25-basis-point cut — just one quarter of one percentage point. Changes to the federal funds rate generally take time to ripple out to other interest rates, but even if that cut were to hit mortgage rates immediately, 25 basis points isn’t transformative.
In this case, though, lenders might have already adjusted. “The mortgage market may have already largely built in the impending rate cut, as we’ve seen mortgage rates come down over the past few weeks,” Lisa Sturtevant, chief economist for Bright MLS, a multiple-listing service in the mid-Atlantic region, said in a statement.
Prospective home buyers delaying a home search in hopes of lower mortgage rates may want to just get going. Instead of sweating the Fed, focus on variables you have more control over that could net you a lower mortgage rate, like an improved credit score or a lower debt-to-income ratio. Making yourself the strongest possible mortgage candidate should help you qualify for the lowest interest rate a lender will offer, whenever you’re ready to make a move.
