The Federal Reserve is set to meet this month to discuss whether inflation has gone down to its target level and whether it could cut its benchmark rate.
Throughout 2024, the Fed has kept its benchmark rate elevated. While it does not have a direct impact on mortgage rates, the Fed's benchmark rate does influence the rates offered by mortgage lenders.
If the Fed raises its short-term interest rates, the yield on the 10-year Treasury bond is also likely to rise, which signals to lenders that inflationary pressures could be increasing. In response, lenders will raise their interest rates, including mortgage rates, according to Michael Gifford, CEO and co-founder of home equity investment company Splitero.
Experts are now weighing in on the different possibilities of rates falling after the Fed's upcoming July meeting.
Mortgage Rates Won't Fall
Experts largely believe that the Fed won't cut its benchmark rate in the upcoming meaning. This means mortgage rates are also unlikely to fall.
"Our sense is the Fed will not be ready to act and lower rates at the July meeting," Steve Wyett, chief investment strategist at BOK Financial, told CBS News. "Comments from Fed governors - but especially Chair Powell - lead us to believe the Fed is playing the long game when it comes to inflation."
As of June, the inflation rate in the US was 3.3%. That is higher than the Fed's target of 2%, which officials said must be met before they begin cutting the benchmark rate. That being said, Fed officials have noted there are indications that inflation is moving in the right direction.
"Consumer price inflation was running well below where it was a year earlier, but further progress toward the Committee's 2 percent inflation objective had been modest in recent months," minutes released by the department read.
Mortgage Rates May Decline Soon
While a rate cut may not come this month, some experts say the Fed could still cut its benchmark rate in September. That could, in turn, lower mortgage rates, which are currently at 6.95% for the 30-year fixed term and 6.25% for the 15-year term, per Freddie Mac. That being said, experts said mortgage rates would likely only see a minimal decline.
