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Why Mortgage Rates Could Continue To Decline

When delving into housing market news, you'll often encounter discussions about inflation and decisions made by the Federal Reserve (the Fed). But how do these factors affect your plans to buy a home? Here's a breakdown of what you should know.

Stalling Federal Funds Rate Hikes

The Fed aims to curb inflation, and one way they do this is by raising the Federal Funds Rate to slow down economic growth. Although this doesn't directly dictate mortgage rates, it does have an impact.

Recent indicators show that inflation is cooling, suggesting that the Fed’s prior rate increases have been effective. Consequently, the Fed has been tapering its rate hikes, with no increases since July (see graph below):

Moreover, the Fed has signaled potential rate cuts in 2024, indicating their confidence in the economy’s improvement. Why does this matter for your home-buying plans? It could lead to reduced mortgage rates and enhanced affordability.

Declining Mortgage Rates

Mortgage rates are influenced by numerous factors, including inflation and the Fed’s actions. Now that the Fed has paused its rate increases, the likelihood of mortgage rates continuing to trend downwards is higher (see graph below):

Though mortgage rates might experience fluctuations, recent patterns and expert forecasts suggest a potential downward trajectory in 2024. This would benefit buyers by improving affordability and providing sellers with more flexibility as they won’t feel as bound to current low rates.

The Fed’s choices indirectly impact mortgage rates. By holding off on raising the Federal Funds Rate, the trend toward declining mortgage rates is likely to persist. For tailored advice on navigating these housing market shifts, consult a reliable real estate expert who can guide you through these changes.


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