Mortgage rates tick down after encouraging inflation news

Mortgage rates dropped back to three-week lows as bond yields continued their downward trajectory on Thursday. Good news from the Bureau of Labor Statistics that inflation eased slightly from June has rekindled hope that the central bank will — at the very least — not raise rates at their next meeting on September 16.The CPI reading this week will be followed by the PCE inflation report, which is the Fed’s preferred inflation gauge.That print, which arrives in two weeks, is also expected to show inflation cooled slightly in July after June’s negative surprise, according to analysts at Oxford Economics.

The CME FedWatch tool shows a 65.4% chance that the Fed will hold rates steady at their upcoming meeting.Mortgage rates move closely with the yield on the 10-year U.S.Treasury note, which has climbed steadily since the U.S.

attacked Iran in February.Over the last six months, the rate has gained 20% going from 3.9% on February 28 to 4.72% earlier this week. The move down to 4.64% as of this writing builds on hopes that a deal in Iran may be forthcoming and that a possible uptick in unemployment will give the Fed cover to reexamine monetary policy.The move will be welcome to frustrated homebuyers who have been waiting for four years for mortgage rates to come down.

According to data from Freddie Mac, the average 30-year mortgage rate was 6.67% this week through August 12, a two basis point drop from a week earlier.Any larger downward move in interest rates will likely build momentum in pent up demand.According to the Mortgage Bankers Association, mortgage loan applications have increased 3.6 percent week-over-week on a seasonally adjusted basis.“After five consecutive weeks of increases, mortgage rates declined slightly last week as oil prices dipped briefly on the hopes of a sustained resolution to the war in Iran,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist.

“The reprieve in rates supported an increase in both purchase an...