Mortgage rates have some room to come back down in June after PCE price index shows annual inflation easing to 2.65 percent in April, and Q1 2024 GDP growth revised downward to 1.3 percent.

At Inman Connect Las Vegas, July 30-Aug. 1, 2024, the noise and misinformation will be banished, all your big questions will be answered, and new business opportunities will be revealed. Join us.

Mortgage rates have some room to come back down in June after a key inflation metric moved in the right direction in April, reviving speculation in bond markets that the Fed will start cutting rates as soon as September.

The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, eased to 2.65 percent in April, the Commerce Department’s Bureau of Economic Analysis reported Friday.

That’s only a slight improvement from the 2.70 percent annual growth registered in March, but the PCE price index is once again inching closer to the Fed’s 2 percent inflation target. The index had previously dipped to 2.46 percent in January, before moving in the wrong direction in February and March.

PCE and Core PCE trending down

Core PCE, which excludes the cost of food and energy and can be a more reliable indicator of underlying inflation trends, dropped to 2.75 percent in April and has been steadily falling since January.

Ian Shepherdson

“The inflation numbers alone will not be low enough to trigger a Fed easing by September — payroll growth will need to slow markedly, too,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note to clients. “But that’s also our base case, given the clear weakening in the employment components of key business surveys.”

Futures markets tracked by the CME FedWatch Tool on Friday showed investors are pricing in a 53 percent chance of at least one Fed rate cut by Sept. 18, up from 46 percent on April 30. But futures markets, which at the beginning of the year were predicting six Fed rate cuts totaling 1.5 percentage points, now see little chance (11 percent) that the Fed will cut rates by more than half a percentage point.

Forecasters at Pantheon Macroeconomics maintain that as the economy continues to cool, the Fed will bring its target for the short-term federal funds rate down by 1.25 percentage points by the end of the year, and that rates on 10-year Treasury yields will drop to 3.25 percent.

Mortgage rates and Treasury yields also dipped on Thursday after the Bureau of Economic Analysis revised downward its estimate of first-quarter gross domestic product (GDP) annual growth, from 1.6 percent to 1.3 percent, saying consumer spending rose less than previously estimated.

Yields on 10-year Treasurys, a useful barometer for mortgage rates, have dropped by 14 basis points this week to 4.5 percent, down from Wednesday’s high of 4.64 percent. A basis point is one-hundredth of a percentage point.

An index maintained by Mortgage News Daily showed rates on 30-year fixed-rate mortgages dropped 5 basis points Thursday and another 12 basis points on Friday.

Loan lock data tracked by Optimal Blue lags by a day but shows that after surging through the 7 percent mark Wednesday, rates on 30-year fixed-rate loans dipped Thursday and were headed back below 7 percent.

While still well below the 2024 high of 7.27 percent registered on April 25, the rebound in mortgage rates in the second half of May put off some would-be homebuyers.

Requests for purchase loans have posted three consecutive week-over-week declines, according to recent surveys of lenders by the Mortgage Bankers Association (MBA).

Mortgage forecasts diverge

MBA and Fannie Mae forecasters differ on where rates are headed next, with MBA economists predicting on May 16 that mortgage rates have room to drop to 6.5 percent by the end of this year and below 6 percent by the end of 2025.

Fannie Mae economists predicted in a May 13 forecast that rates on 30-year fixed-rate loans won’t drop below 7 percent until next year.

Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription