Big changes are happening in the mortgage market! Last week, we saw mortgage rates drop to their lowest levels in almost a year. This is a significant development and a major reason for optimism as we head into this week’s Federal Reserve meeting.
Low Rates Drive High Activity
This downward trend in rates, which has been happening since May, is already having a big impact on the housing market. According to the Mortgage Bankers Association, the past week saw the strongest demand from borrowers since 2022, with both home purchase and refinance applications surging. The 30-year fixed mortgage rate dropped by .15 percent, marking the largest one-week decrease in the past year. This is great news, whether you’re looking to buy your first home, trade up, or lower your current monthly payment.
This momentum is fueled by a combination of factors, including a cooling labor market, which has increased the likelihood of a Fed rate cut, and strong demand for U.S. Treasury bonds. In fact, we just saw a highly successful auction for 10-year notes, a sign of strong investor confidence that typically helps keep rates low.
What The Economic Data Is Telling Us
Last week brought some key economic reports that are also shaping the market:
• Producer Price Index (PPI): Wholesale prices cooled down in August, with the PPI falling by 0.1 percent month-over-month. This is a positive sign that inflationary pressures may be easing.
• Consumer Price Index (CPI): While the PPI was a welcome sign, consumer prices showed an increase of 0.4 percent in August, driven largely by housing and energy costs. The Fed will be watching this closely.
• Housing Market: The housing market is a mixed bag. New Census Bureau figures show that nearly a million homeowners paid off their mortgages in 2024, but those still with a mortgage saw their monthly costs increase, largely due to higher rates and insurance. That makes this current drop in rates even more important for those looking to save money.
Looking Ahead to the Fed Meeting
The main event this week is the Federal Reserve’s meeting that adjourns on September 17. A 0.25 percent rate cut is now seen as a near-certainty, but the real question is what comes next. The Fed will release its updated economic projections, which will tell us how many more rate cuts it expects for the rest of 2025. The market is currently anticipating three cuts, while the Fed’s last projection was for only two. The market’s reaction will hinge on whether the Fed aligns with the market’s expectations or sticks to its more conservative forecast.
With rates near their one-year lows, it could be a perfect opportunity for you to save. If you’re considering a refinance, or if you’re a prospective homebuyer, now is the time to get the numbers so you can act quickly if rates continue to fall.
I’m here to help you understand what all this means for your specific situation. Don’t hesitate to reach out if you have any questions. You can simply send me an email, or call/text 818.307.6072, and let’s talk.
