Inflation has come down. Here’s what this means for mortgage rates.

According to the latest Consumer Price Index (CPI) report, Inflation cools in June, growing at the slowest pace in two years. This is welcome news after inflation hit a 40-year high last year.

One group that may be particularly relieved by this news is home buyers. including mortgage rates growing high Over the past few months, the cost of buying a home may have some wondering if it’s worth it in the current rate environment — or if they can even afford it.

Slower inflation may signal better days ahead. That said, potential homebuyers should keep this in mind when weighing their mortgage options.

Check out today’s top mortgage rates here to start comparing your options

Inflation has come down. Here’s what this means for mortgage rates.

At a basic level, inflation is a measure of how much the prices of goods and services are rising over time. When inflation is high, the dollar’s purchasing power decreases—in other words, it becomes more expensive to buy the things you need. It becomes more expensive for lenders to lend money, which Directly affects mortgage rates.

When inflation is high, lenders often raise their interest rates to compensate for the increased costs they face. As a result, borrowers pay more over the life of their loan. On the other hand, when inflation is low, lenders can afford lower rates to entice borrowers to borrow. That means buyers save money on their loan repayments.

Mortgage rates are Currently close 7%, the highest since October 2022. however, Experts predict They will begin to decline in the next few months, and a noticeable relief in the latest inflation numbers may finally be visible.

Darren Tully, senior loan officer at Cornerstone Financial Services, said recently, “While some stubborn numbers still held low inflation, hopefully, a good reading year will be a catalyst for improved rates.” CBS News.

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Other Factors That Affect Mortgage Rates

While the latest CPI report is encouraging, it’s important to remember that inflation is only one factor that affects mortgage rates. Other factors include market forces of supply and demand, the Fed’s monetary policy, and your own personal financial situation.

For example, if mortgage rates begin to decline significantly, this could make home buying more affordable for more people, leading to greater demand for existing housing inventory. If demand outstrips supply, lenders can raise rates again to capitalize.

Additionally, mortgage rates are closely tied to the federal funds rate, which may still remain high for some time. When the Fed stopped raising rates in June, Two more hikes are expected For 2023, starting with the upcoming July 25-26 meeting. So, while inflation is starting to cool, that doesn’t mean we’re still out of the woods with rates.

Fortunately, when larger economic forces are out of your control, there are things you can do Get the best rates Currently available.

Lenders evaluate your financial health when approving you for a mortgage, and if you’re in a strong financial position, they’re more likely to offer you a lower rate. For example, if you have a high Credit score Or pay a larger down payment, you’ll be more attractive to lenders and have a better chance of getting a rate on the lower end of the current spectrum.

Check out the top mortgage offers here to see what rates you might qualify for.

Bottom line

Finally, the news of a downward trend in inflation could be positive for buyers. Lower inflation rates can be a step towards buyers being able to secure lower interest rates on their mortgages, which can help them save money in the long run.

However, it’s important to remember that inflation is only one part of the equation when it comes to mortgage rates — and the overall cost of buying a home. Homebuyers also need to consider other factors when evaluating home affordability, such as property taxes, insurance and closing costs.

If your goal is to buy a house In the near futurethere what you can do To put yourself in the best position. take time shops around And carefully compare lender offers to find the lowest in today’s market. Consider getting a mortgage now and Refinancing Later when the rate is lower. When in doubt, talk to a financial advisor to determine the best route for your personal situation.