Thinking about buying or selling an apartment? If so, you're probably keeping a close eye on mortgage rates and wondering what's next. One key factor affecting mortgage rates is the Federal Funds Rate, which influences the cost for banks to borrow money from each other. While the Federal Reserve (the Fed) doesn’t directly set mortgage rates, they control the Federal Funds Rate, creating a significant connection between the two.
Many are closely watching for signs of when the Fed might lower the Federal Funds Rate, as this could lead to lower mortgage rates. The Fed meets next week, and three critical metrics they’ll consider in their decision-making process are:
1. The Rate of Inflation
Inflation has been a hot topic, and you've likely felt its impact in your everyday purchases. The Fed aims to bring inflation down to 2%, and while it’s still above that target, it’s moving in the right direction.
2. Job Creation
The Fed monitors monthly job creation closely, looking for a slowdown in job growth as an indicator of a cooling economy. Recent data shows that fewer jobs are being added than before, suggesting the economy is beginning to slow down.
3. The Unemployment Rate
A low unemployment rate indicates many people are employed, but it can also lead to higher inflation due to increased spending. The unemployment rate has been rising slightly, which is a sign the Fed looks for before cutting the Federal Funds Rate.
What Does This Mean Moving Forward?
Mortgage rates will likely remain volatile in the near future. Although the economy is showing signs of heading in the desired direction, it’s improbable that the Fed will cut the Federal Funds Rate in their upcoming meeting. Jerome Powell, Chair of the Federal Reserve, emphasized the need for more data and consistent trends before making any policy changes.
Experts project a high likelihood that the Fed will lower the Federal Funds Rate by their September meeting, assuming the current economic trends continue. While the Fed doesn’t set mortgage rates directly, a cut in the Federal Funds Rate typically leads to lower mortgage rates.
Given the potential for new economic reports and global events to alter the timeline, trying to time the market can be risky. Instead, rely on a trusted local real estate agent to keep you informed about the latest trends and their implications for you.
Bottom Line
Recent economic data offers hope for potential relief in mortgage rates. Count on me, your local real estate agent you can trust to keep you up to date on the latest trends and what they mean for you.
