Weekly Mortgage Rates Drop, Easing Affordability

This article was first published on NerdWallet.com.

Mortgage rates fell this week after the chair of the Federal Reserve uttered long-awaited, market-moving words.

"The time has come for policy to adjust," Fed Chair Jerome Powell said Aug. 23 in a speech. Translated from Fedspeak to English, this means, "We're going to cut interest rates soon."

Investors already were betting that the Federal Reserve would reduce the federal funds rate at the central bank's next meeting, Sept. 17-18. But when Powell said it out loud, he provided confirmation that markets sought. The average rate for the 30-year fixed-rate mortgage reacted by dropping 11 basis points to 6.27% in the week ending Aug. 29. A basis point is one one-hundredth of a percentage point.

Powell explained that the inflation rate seems like it's headed toward the Fed's goal of 2%. Meanwhile, job growth has slowed and the unemployment rate has gone up. These developments are a result of restrictively high interest rates set by the Fed.

"We do not seek or welcome further cooling in labor market conditions," Powell said. And cutting interest rates is a way to prevent labor markets from cooling more.

Rates have been trending downward

Orphe Divounguy, senior economist for Zillow Home Loans, called Powell's pronouncement "a gift to investors and home shoppers alike." It's a gift...