Will mortgage rates fall after the July Fed meeting? Here’s what experts expect

With the Federal Reserve’s July meeting on the horizon, many prospective homebuyers and homeowners are wondering what it could mean for mortgage rates. After years of relatively high borrowing costs, even the slightest dip could open doors for those hoping to buy or refinance. But the path forward is far from clear.

Mortgage rates have been stubbornly elevated throughout the first half of this year, keeping pressure on affordability as home prices remain elevated. And, while inflation has cooled overall compared to recent highs, the latest inflation reading shows that it ticked up again in June to 2.7% after rising slightly in May. Those recent trends will have some influence on the Fed’s next move — and that could ripple through to mortgage rates.

So, will rates finally ease after the July meeting, or are borrowers in for more of the same? Industry experts weigh in below on what’s likely to happen and what buyers can do now to prepare, regardless of which way the wind blows.

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Will mortgage rates fall after the July Fed meeting? What experts expect

Industry experts generally don’t foresee meaningful mortgage rate drops right after the July Fed meeting. The reason behind that sentiment comes down to how mortgage rates work. 

“The federal funds rate doesn’t directly control mortgage rates, which track the 10-year Treasury yield,” says Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad.

And, based on historical patterns, a 25-basis-point Fed cut — which seems unlikely given the June uptick in inflation — might only lower 30-year fixed rates by 10 to 15 basis points. This would drop rates from around 6.85% to somewhere between 6.7% and 6.75%.

That modest relief isn’t guaranteed, however. Casey Gaddy, a senior agent at The Gaddy Group with Keller Williams Empower, notes that markets often price in expected rate cuts ahead of time. So, potential benefits may already be reflected in current rates.

For mortgage interest rates to drop significantly, experts say these key conditions would need to align:

• Sustained inflation decline: Inflation must dip closer to 2% for several consecutive months. According to Glick, the Consumer Price Index (CPI) reports would need to show consistent cooling for markets to anticipate a rate cut and mortgage rates down before September.
• Weaker job market: “A noticeable rise in unemployment would signal to the Fed that the economy is slowing enough to warrant a rate cut,” Gaddy explains. This would lower Treasury yields, which mortgage rates track closely.
• Fed signals future cuts: “We need the Fed’s statement to be more accommodating for future cuts,” Jeff Gennarelli, president of Forward Mortgage, a division of Mutual of Omaha Mortgage, points out. “If not, we may see the mortgage rates move higher on the cuts.”

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Why you should prepare for the homebuying process now

Though the chances of immediate rate relief are slim, experts point to three reasons to prepare for homebuying now:

Home prices may go up when rates drop

There’s a classic trade-off in real estate: When mortgage rates fall, home prices typically rise. 

“The mistake I see many make is waiting for interest rates to go down to [buy] their dream home,” Gennarelli says. “In the meantime, the price of the home goes up, and they miss that appreciation.”

His advice? Find a property that works for your family and buy it. If rates drop later, you can refinance to get a better rate while protecting yourself from further price increases.

Pre-approval and financing prep take time

Getting pre-approved for a mortgage now could make a big difference when the perfect house hits the market.

The process usually takes three to seven business days if you have all your documents ready, according to Glick. But if you’re starting from scratch — gathering pay stubs, tax returns and bank statements while working to improve your credit — the full prep process can take weeks.

Gaddy warns that waiting puts you at a serious disadvantage. 

“You risk watching the perfect home get swept up by a [prepared] buyer while you’re still contacting lenders to submit paperwork,” Gaddy says.

Available inventory may shrink as demand increases

“When mortgage rates fall, inventory typically shrinks,” says Glick. “Lower rates bring more buyers into the market, increasing demand and speeding up sales. Homes sell faster, reducing the number of listings.”

Meanwhile, many current homeowners are hesitant to sell because they’re locked into pandemic-era rates of 3% or lower. Gaddy calls this “golden handcuffs” — homeowners staying put rather than giving up rock-bottom rates. The result is more buyers competing for fewer available properties.

The bottom line

Mortgage rates are unlikely to drop dramatically after the July Fed meeting, and even if they do, waiting for the perfect rate could cost you more than moving forward now. If you’re serious about buying, Gennarelli suggests speaking with a reputable loan officer who can guide you with transparency. If needed, boost your credit score by paying down debt and avoiding new credit inquiries. “A 740 [or higher] score can save you thousands over the loan’s life,” Glick notes. Getting prepared now positions you to act quickly when the right opportunity comes along, regardless of what the Fed decides.