Mortgage rates decreased again this week, continuing a downward trend from a 2024 peak in late April, as inflation and retail sales data point to a consumer that is slowing down. Adding to reports of easing wage growth and dwindling consumer savings last week, this week’s inflation report showed that consumer price growth is moderating. Lower than expected retail sales data also pointed to a slowing economy. Both are signs that inflation could continue to move in the right direction.
Long-term interest rates, like mortgage rates, depend on expected inflation and economic growth. The latest reports helped to pull Treasury yields and mortgage rates lower. Mortgage rates are now at their lowest level since late February, helping to slightly improve a still very challenging affordability picture for buyers.
Financial markets still expect at least one or two central bank rate cuts this year. Expect more rate volatility ahead as the Fed and investors wait for more conclusive evidence of a return to low, stable and more predictable inflation.