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Inflation just fell. Will mortgage rates fall now?

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Mortgage rates have risen steadily in recent years but that trend could soon end if inflation continues cooling. Getty Images/iStockphoto

As millions of Americans wait for this inflationary cycle to cool, the Bureau of Labor Statistics on Wednesday announced a slight drop in the inflation rate for April. Down to 3.4% from March's 3.5%, the drop was minimal but still welcome after inflation rose in the two months prior. While still significantly above the Federal Reserve's target 2% goal, any fall is welcome news for borrowers. And it's especially important for homebuyers looking to purchase a property.

Already dealing with the highest mortgage interest rates in decades, these buyers are looking for any relief they can get before closing on a new home. So with inflation cooling in April, then, many may be wondering if mortgage rates will soon follow the downward trend. Below, we'll break down what to know in light of these developments.

See what mortgage rate you could get with inflation falling now.

Will mortgage rates fall now?

While a drop in inflation won't necessarily cause mortgage interest rates to drop dramatically, it won't hurt. However, these rates are largely influenced by the federal funds rate, which has remained stuck at a 23-year high since last summer. Since the latest inflation rate is only marginally improved, then, it's unlikely that the Federal Reserve will lower their rate, so expect mortgage rates to remain around where they are now.

That noted, the Fed doesn't directly dictate what lenders offer borrowers. And if lenders think the federal funds rate may soon be cut, as it could be if inflation continues to cool, they may get ahead of that by offering slightly lower interest rates to borrowers right now. But a bigger cut that's likely to remain consistently low will only come when the Fed acts. Still, mortgage rates change daily, and if buyers look to lock in a rate today — or this week — they'll likely be better served than if they waited for the next big financial news cycle. 

Explore mortgage rates and lenders online today.

Why you should lock in a mortgage rate now

Now could be a great time to lock in a mortgage rate, if only to capitalize on the cooling inflation news. But there are other reasons to be proactive now. Here are two:

  • Rates could rise again: Sure, a rate increase doesn't appear likely right now. But the economy is dynamic and any number of factors could cause the Fed to raise rates again and mortgage rates will follow. To get to their 2% target goal, a raise may be needed, so it makes sense to lock in a mortgage rate before that possibility becomes a reality.
  • You may lose your dream home: Waiting for mortgage rates to evolve in a beneficial fashion is a lost cause. No one can predict when that will happen or by how much rates will fall even if it does. In the interim, if waiting for the perfect rate, you could lose your dream home. So, if you find a home you love, buy it anyway. Rates will eventually fall again — at which point you can refinance — but the home of your dreams may never return to the market.

The bottom line

A lower inflation rate, no matter how much lower, is still better than a rising one. That noted, inflation still needs to cool significantly for homebuyers to see major relief. Instead, today's report will likely lead to just slightly cooler rates. But that may be enough for some buyers, especially with the prospect of higher rates to come and the possibility that buyers will lose their dream home if they wait much longer.

Start exploring your mortgage rate options online now

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