Hey there,

I hope all is well! As someone who’s thinking about buying or selling a home, you’re probably paying close attention to mortgage rates – and wondering what’s ahead.

Table of Contents

• Federal Funds Rate

  • 1. The Rate of Inflation

  • 2. How Many Jobs the Economy Is Adding

  • 3. The Unemployment Rate

• What Does This Mean Moving Forward?

• I’m Here To Help

Federal Funds Rate

One thing that can affect mortgage rates is the Federal Funds Rate, which influences how much it costs banks to borrow money from each other. While the Federal Reserve (the Fed) doesn’t directly control mortgage rates, they do control the Federal Funds Rate.

The relationship between the two is why people have been watching closely to see when the Fed might lower the Federal Funds Rate. Whenever they do, that’ll put downward pressure on mortgage rates. The Fed meets this week, and three of the most important metrics they’ll look at as they make their decision are:

1. The Rate of Inflation

2. How Many Jobs the Economy Is Adding

3. The Unemployment Rate

Here’s the latest data on all three.

1. The Rate of Inflation

You’ve probably heard a lot about inflation over the past year or two – and you’ve likely felt it whenever you’ve gone to buy just about anything. That’s because high inflation means prices have been going up quickly.

The Fed has stated its goal is to get the rate of inflation back down to 2%. Right now, it’s still higher than that, but moving in the right direction.

2. How Many Jobs the Economy Is Adding

The Fed is also watching how many new jobs are created each month. They want to see job growth slow down consistently before taking any action on the Federal Funds Rate. If fewer jobs are created, it means the economy is still strong but cooling a bit – which is their goal. That appears to be exactly what’s happening now. Inman says:

So, while employers are still adding jobs, they’re not adding as many as before. That’s an indicator the economy is slowing down after being overheated for quite some time, which puts downward pressure on inflation. This is an encouraging trend for the Fed to see.

3. The Unemployment Rate

The unemployment rate is the percentage of people who want to work but can’t find jobs. So, a low rate means a lot of Americans are employed. That’s a good thing for many people.

But it can also lead to higher inflation because more people working means more spending. Right now, the unemployment rate is low, but it’s been rising slowly over the past few months.

It may seem backwards, but a consistently rising unemployment rate is something the Fed needs to see before deciding to cut the Federal Funds Rate. That’s because a higher unemployment rate would mean reduced spending, and that would help get inflation back under control. But they also don’t want unemployment to go too high—causing a recession. That’s why this is one of the key metrics they watch to help decide when to lower the Fed Funds Rate.

What Does This Mean Moving Forward?

While mortgage rates are going to continue to be volatile in the days and months ahead, these are signs the economy is headed in the direction the Fed wants to see. But even with that, it’s unlikely they’ll cut the Federal Funds Rate when they meet today and tomorrow. Jerome Powell, Chair of the Federal Reserve, recently said:

Basically, we’re seeing the first signs now, but they need more data and more time to feel confident that this is a consistent trend. Assuming that direction continues, according to the CME FedWatch Tool, experts say there’s a projected 100% chance the Fed will lower the Federal Funds Rate at their September meeting.

Remember, the Fed doesn’t directly set mortgage rates. It’s just that whenever they decide to cut the Federal Funds Rate, mortgage rates should respond.

Of course, the timing of when the Fed takes action could change because of new economic reports, world events, and other factors. That’s why it’s usually a good idea to take these projections with a grain of salt and not try to time the market.

I’m Here To Help

Recent economic data may signal that hope is on the horizon for mortgage rates, but new data is always coming out. If you have any questions about your local market or would like to discuss your plans in the coming months, feel free to reach out by responding to this email or giving me a call.

I’ll always do my best to be the real estate agent you can trust to keep you up to date on the latest trends and what they mean for you.

Here to serve,

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