M
ortgage rates dropped to 6.35% this week, the steepest weekly decline of 2024, and the 30‑year average fell to its lowest level since October 2024. The fall marks the eighth straight week of steady or falling rates, and it has spurred a surge in demand. Applications for new mortgages rose 9.2% overall, with purchase applications up 7% and 23% year‑over‑year, while refinance requests climbed 12%. Analysts say the psychological impact of rates slipping below 6.5% is encouraging buyers who can afford to act.

    Retail inflation edged up to 2.9% in August, the highest rate since January, according to the latest CPI data. The rise follows a weak jobs report and a significant downward revision of labor market figures. While inflation remains above the Fed’s target, the labor market’s softness is likely to weigh more heavily on the central bank’s decision‑making.

    The Federal Reserve is expected to cut short‑term rates next week, and many market participants believe it may cut rates at each of its remaining three meetings this year. As of Thursday, traders priced in a 75% probability of three consecutive 25‑basis‑point cuts. Some speculate a larger 50‑basis‑point cut, as seen a year ago, but most economists predict a more modest move. Sturtevant projects a 25‑basis‑point cut in September, while Melissa Cohn notes that the Fed could go either way given the tension between labor data and inflation.

    In short, falling mortgage rates and rising loan applications are boosting home‑buying activity, but inflation and a weak labor market are keeping the Fed cautious. The next policy meeting will likely see a rate cut, with the possibility of further reductions later in the year depending on how the data unfold.