September CPI Report Brings a Bit of Relief — But Rates Hold Steady

Prices across the economy rose a little slower than expected in September, which is a good sign for anyone hoping to see lower mortgage rates ahead.

The latest government report showed that inflation increased 0.3% for the month and 3% over the past year, just slightly less than economists had predicted. “Core” inflation — which leaves out food and gas prices — also came in a little lower than expected.

That means prices for most everyday items are no longer rising as fast as they were last year, and the Federal Reserve is slowly getting closer to its goal of bringing inflation back down to normal levels.

What That Means for Interest Rates

The Federal Reserve meets next week and is expected to cut its key interest rate slightly, which would mark the first rate cut in more than a year. Lower inflation gives the Fed more confidence to ease up after two years of trying to cool the economy.

For homebuyers and homeowners, that’s good news. When inflation slows and the Fed starts lowering rates, mortgage rates usually follow — sometimes right away, sometimes with a small delay.

What’s Happening in Housing

Home sales picked up slightly in September, rising about 1.5% from the previous month. There are now roughly 1.55 million homes for sale, which is a bit higher than earlier in the year. Prices also held firm, with the median U.S. home price at $415,200, up about 2% from last year.

That’s the 27th straight month that home prices have increased compared to the year before — a reminder that even in a slower market, housing demand remains strong and inventory is still tight.

Where Mortgage Rates Stand

According to Freddie Mac, the average 30-year fixed mortgage rate fell to 6.19% this week, the lowest level in nearly a year. The 15-year fixed rate dropped to 5.44%.

Rates have now improved about a third of a percent compared to this time last year. It’s not a dramatic drop, but enough to make a real difference in monthly payments — especially for anyone looking to refinance from a loan with a rate in the 7’s or 8’s.

What to Watch Next

Markets are waiting to hear what the Federal Reserve says next week about its plans for future rate cuts. If inflation continues to cool through the fall, we could see mortgage rates drift even lower by the end of the year.

For now, buyers are starting to come back into the market, and homeowners are beginning to explore refinancing again as rates inch down.

Bottom Line:Inflation is easing, the Fed is getting ready to cut rates, and mortgage rates are holding near the lowest levels of the year. If you’ve been waiting to buy or thinking about refinancing, it’s a good time to review your options and see how much you could save.