Boost for Homebuyers From Unchanged Interest Rates

A small toy house on a pile of dollar bills on a desk.

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The Fed has given some hope to homebuyers by declining to raise the federal funds rate, a key overnight bank lending rate, at its June meeting. Although the Fed rate and mortgage rates move independently, the same market factors drive the rate increases and cuts.

Inflation, job growth and the overall economic outlook impact lenders and how they set rates. A steady Fed rate should translate to fewer increases in mortgage rates. However, availability and affordability may still be obstacles when shopping for a home. In its official statement, the Federal Open Market Committee (FOMC) said, "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent," and that "the Committee remains highly attentive to inflation risks." Although the statement did also say that: "The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year."

Factors squeezing buyers

Mortgage application volume increased 15.6% from one week earlier for the week ending June 7, 2024, according to the Mortgage Bankers Association. However, homebuyers continue to be challenged by low inventory levels and higher mortgage interest rates.

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Housing starts in April 2024 were 3% below the revised March rate and 2% below the April 2023 rate. With many existing homeowners locking in low mortgage rates, inventory will remain challenging as fewer people list homes. A strong job market has led to fewer forced sales that usually accompany unemployment. These are factors you should watch during peak moving season.

Peak moving season runs from April through September, accounting for almost 80% of all moves. Better weather and trying to get kids settled before the new school year begins have made June, July and August the most popular months to resettle. Moving “offseason” may be the way to go if the competition is keeping you out of your desired neighborhood or school district.

Use our tool, in partnership with Bankrate, to compare mortgage rates from several lenders.

Inflation is receding and rates have come down slightly

Slowing inflation and a small increase in mortgage rates is a good news, bad news situation. The average interest rate for 30-year fixed-rate mortgages decreased by .04 basis points to 6.99%, compared to 7.03% the week of May 30.

Buying a home can be both terrifying and exhilarating. It’s probably the biggest purchase you will make in your lifetime. Market factors will largely determine what house you can buy, but not what kind of home you create.

Donna joined Kiplinger as a personal finance writer in 2023. She spent more than a decade as the contributing editor of J.K.Lasser's Your Income Tax Guide and edited state specific legal treatises at ALM Media. She has shared her expertise as a guest on Bloomberg, CNN, Fox, NPR, CNBC and many other media outlets around the nation. She is a graduate of Brooklyn Law School and the University at Buffalo.