Markus Andrews

In a speech Tuesday, Vice President Kamala Harris, the de facto Democratic nominee, positioned herself as a champion for the middle class.  
Here’s a look at how her economic agenda for middle-class families may take shape, based on the policies she advocated for during her first presidential bid in 2020 and as a senator.
One of her signature proposals as a senator was the LIFT the Middle Class Act, which would have provided a tax credit of up to $3,000 per person for low- and middle-income workers.

Vice President and 2024 Democratic presidential candidate Kamala Harris speaks at a campaign event in Atlanta, Georgia, on July 30, 2024.
Elijah Nouvelage | Afp | Getty Images

“Building up the middle class will be a defining goal of my presidency,” Vice President Kamala Harris said at a political event in Atlanta on Tuesday evening.
“When our middle class is strong, America is strong,” the de facto Democratic presidential nominee said to the crowd of more than 10,000 supporters.

“And to keep our middle class strong, families need relief from the high cost of living so that they have a chance, not to just to get by, but to get ahead,” she added.
Here’s a look at how Harris may make that happen, based on the policies she advocated for during her first presidential bid in 2020 and as a senator.
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One of Harris’ signature proposals as senator — the LIFT the Middle Class Act, or Livable Incomes for Families Today — would have provided an annual tax credit of up to $3,000 per person (or $6,000 per couple) for lower- and middle-income workers, on top of the benefits they already receive.
The size of the credit would have amounted to “significant tax relief,” according to the Committee for a Responsible Federal Budget.

The Harris campaign did not immediately respond to CNBC’s request for comment. 

How the LIFT Act could look today

Since the LIFT Act was first proposed in 2018, the cost of living has only skyrocketed, hitting working-class Americans especially hard.
For these households, “real incomes have declined or remained flat due to inflation,” Tomas Philipson, former chair of the White House Council of Economic Advisers, told CNBC. That makes many workers feel less confident about their financial standing — and less satisfied with President Joe Biden’s handling of the economy.
At the same time, the rise of artificial intelligence has stoked fears about long-term job security.
In that context, “there’s a good rationale” for refloating a tax credit for those making under a certain income threshold, according to Laura Veldkamp, a professor of finance and economics at Columbia University Business School.
“A lot of people are asking the question, ‘Will AI take my job?’ There are people whose hard-earned skills could be obsolete,” she said. “One way to deal with that is to have more social insurance.”

But a tax credit like LIFT would also be extremely costly, according to Tax Policy Center estimates from 2018 and 2019.
To help cover the tab for the additional financial support, Harris at the time proposed repealing provisions of the Tax Cuts and Jobs Act for taxpayers earning more than $100,000.
However, funding such a tax credit now could be tough amid growing concerns over the federal budget deficit. Harris will also need to address trillions of expiring tax cuts enacted by former President Donald Trump before 2025.

How the LIFT Act could support renters

A present-day version of the LIFT Act may benefit renters the most, as many are part of the income category the tax credit is targeting, according to Francesco D’Acunto, an associate professor of finance at Georgetown University.
D’Acunto and other experts suggest the LIFT Act might even be a better aid than the 5% rent cap proposal Biden unveiled on July 16. That proposal calls on Congress to cap rent increases from landlords with 50 existing units or more at 5% or risk losing federal tax breaks.
Harris also supported the idea of rent caps at the campaign rally in Atlanta: “We will take on corporate landlords and cap unfair rent increases.”
However economists have found that such policies inadvertently bring down the available supply of rental units. And rent-control policies could further affect an already, relatively short supply, according to a report by the Federal Reserve published in February.
Rental vacancy rates, or the percentage of all units available for rent, measure the tightness of rental markets; the higher the vacancy rate, the easier it is to find housing, per the Fed.
In 2021, the overall vacancy rate slid to 5.6%, the lowest level since 1984, the central bank found. Supply has since rebounded and plateaued at 6.6% in April, per census data via the Fed.

While the rent cap may lead consumers to believe prices will not increase significantly, it could have negative side effects, such as landlords taking their properties off the rental market, said Karl Widerquist, an economist and professor of philosophy at Georgetown University.
Plus, landlords who lose those federal tax breaks will still be able to raise rents, said Jacob Channel, a senior economist at LendingTree.
The advantage of the LIFT tax credit, said D’Acunto, is that it doesn’t create the same market distortions the rent cap would ignite. “But instead now on the side of the renter, we are actually very directly helping them to defray the effects of rent inflation,” he said.
Adds Widerquist: “We very often give tax benefits to all homeowners in the name of making it more affordable for people to become homeowners, and we don’t give a similar tax break to people who are paying rent. Those are the people who are struggling to become owners.”

Child tax credit is a ‘huge priority’ for Democrats

LIFT was first proposed years before Congress temporarily expanded the child tax credit during the Covid-19 pandemic, which could now be a bigger priority, experts say.
The American Rescue Plan boosted the child tax credit to $3,000 from $2,000, with an extra $600 for children under age 6 for 2021, and families received up to half upfront via monthly payments. Harris described the child tax credit changes as one of the “most important” and “most impactful” parts of the legislation in a 2021 speech.
The child poverty rate plunged to a historic low of 5.2% in 2021, largely due to the expansion, a Columbia University analysis found. Then in 2022, the rate more than doubled to 12.4% after pandemic relief expired, according to the U.S. Census Bureau.

“Whereas the last administration gave tax cuts to billionaires, we gave tax cuts to families through the child tax credit, which cut child poverty in America by half,” Harris said at a political event in North Carolina in late July, before Biden left the race.
Biden’s fiscal year 2025 budget aimed to restore the 2021 child tax credit increase and House lawmakers in January passed a bipartisan tax package, which included a child tax credit expansion. The Senate has scheduled a procedural vote for the bill on Thursday, which will force lawmakers to take a stand on the issue ahead of November.
The enhanced tax break is “a huge priority for Democrats,” said Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation. 
Still, it’s unclear whether Harris, now the clear front-runner for the nomination, will renew calls for LIFT or focus on the child tax credit, which has a different design but a similar goal, he said.
“It’s very hard to say whether they would revisit specific policy options from so long ago,” said Columbia Business School economics professor Brett House.
For now, “there are other cultural and political issues that are going to dominate.”

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The Biden administration is again gearing up to try to forgive the student debt of tens of millions of Americans, after the Supreme Court struck down its first effort last year.
Now, the president has directed the U.S. Department of Education to pursue the regulatory process.
In the coming days, the Education Department will begin emailing borrowers who may be eligible for the wide-scale loan cancellation, the department said on Wednesday.

Two federal judges in Kansas and Missouri on Monday at the urging of several Republican-led states blocked President Joe Biden’s administration from further implementing a new student debt relief plan that lowers payments.
Bloomberg | Bloomberg | Getty Images

The Biden administration is gearing up to try to forgive the student debt of tens of millions of Americans again, after the Supreme Court struck down its first effort last year.
In the coming days, the U.S. Department of Education will begin emailing borrowers who may be eligible for the wide-scale loan cancellation, the department said on Wednesday. It hopes to deliver that relief in the fall, possibly weeks before the 2024 presidential election.

“Today, the Biden-Harris administration takes another step forward in our drive to deliver student debt relief to borrowers who’ve been failed by a broken system,” U.S. Secretary of Education Miguel Cardona said in a statement.
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If, for some reason, a borrower wants to opt out of the debt forgiveness, they must do so by Aug. 30 with their loan servicer, the Education Department said.
Borrowers who are likely to qualify for partial or full debt erasure include those who owe more now than they did at the start of repayment and people who have been paying on their loans for decades.

‘Ready to go as soon as the final rule is published’

The same day the Supreme Court blocked President Joe Biden’s first attempt at sweeping student loan forgiveness, he announced that the White House would try to deliver the relief another way.

Originally, the president attempted to cancel the debt through an executive action. This time he has directed the Education Department to pursue the regulatory process, which experts say should increase its chances of surviving the inevitable next round of legal challenges.
The Education Department is expected to publish its final rule on the debt relief sometime in October.
Wednesday’s announcement suggests the agency plans to act swiftly once the rule is in effect, said higher education expert Mark Kantrowitz.
“Undoubtedly the Biden Administration will be ready to go as soon as the final rule is published, but Republicans may also be ready to file a lawsuit,” Kantrowitz said.

It was a lawsuit brought by six GOP-led states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — that eventually led to the demise of Biden’s first loan forgiveness plan.
The emails may also be a strategy by the Biden team to show millions of Americans that the loan forgiveness is at stake in the election, Kantrowitz said.
“It shows the borrowers what they stand to lose if Republicans win,” he said.
Rep. Virginia Foxx, R-N.C., criticized the latest development.
“The Biden-Harris administration continues to dangle loan ‘forgiveness’ in front of millions of borrowers across the nation,” Foxx said in a statement. “This is just another illegal scheme intended to buy votes in November.”
This is breaking news. Please check back for updates.

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It is difficult to predict future cryptocurrency prices amid political and economic uncertainty, but you can still make some smart tax moves, experts say.
Lower earnings could be a chance to harvest gains or reset your original purchase prices.
Plus, crypto investors can still leverage the crypto wash sale loophole while harvesting losses, experts say.

CFOTO | Future Publishing | Getty Images

It is nearly impossible to predict future cryptocurrency prices amid political and economic uncertainty, but you can still make some smart tax moves, experts say.
As investors brace for interest rate news from the Federal Reserve and weigh policy proposals from former President Donald Trump, the price of bitcoin was at $65,856 around midday Tuesday, while ether bitcoin was trading at $3,310.97, according to Coin Metrics. 

The price of bitcoin dipped to a two-month low in early July after the Fed indicated it was not yet ready to cut interest rates.
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Whether prices move up or down, here are some key crypto tax strategies to consider, according to experts.  

1. Weigh ‘tax-gain harvesting’

Despite recent dips, many longtime crypto investors could have significant gains. The price of bitcoin was still up about 49% year to date, while the price of ether has grown about 40%, as of midday on July 30.
If you are expecting a lower-income year for 2024, it could be a chance for tax-gain harvesting, or strategically selling profitable crypto while in the 0% long-term capital gains bracket. Long-term capital gains rates apply to assets owned for more than one year.

These rates apply to your “taxable income,” which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

“Tax gain harvesting is one of the best strategies,” to spread earnings across multiple years, according to Andrew Gordon, a tax attorney, certified public accountant and president of Gordon Law Group.
Of course, you will need to weigh the tax consequences of boosting your adjusted gross income with crypto gains, which can affect other tax breaks.

2. Reset your purchase price

Harvesting gains and then immediately repurchasing could also be a chance to reset your “basis,” or the original purchase price of an asset, to reduce future taxes, experts say.
The strategy could make sense even at the 15% long-term capital gains bracket if you are expecting higher income in the future and want to maintain your position, said Adam Markowitz, an enrolled agent at Luminary Tax Advisors in Windermere, Florida.
On top of capital gains, some investors also incur an extra 3.8% levy, which kicks in once modified adjusted gross income, or MAGI, exceeds $200,000 for single filers or $250,000 for married couples filing together.

3. Consider the crypto wash sale ‘loophole’

If you are sitting on crypto losses, you could consider tax-loss harvesting, which allows you to offset other investing profits. Once losses exceed gains, you can use the excess to reduce regular income by up to $3,000 per year.
Although tax-loss harvesting often happens at year-end, it is better to harvest crypto losses over time because “those losses may no longer exist” by year-end, Gordon explained.

Typically, investors are subject to the wash sale rule, which blocks you from claiming the tax break if you repurchase a “substantially identical” asset within a 30-day window before or after the sale.
However, the wash-sale rule currently does not apply to cryptocurrency, meaning you could harvest losses and immediately repurchase to maintain your position.

The IRS gives us this loophole. We may as well take it.

Adam Markowitz
Enrolled agent at Luminary Tax Advisors

“The IRS gives us this loophole,” Markowitz said. “We may as well take it.” 
While previous Congressional efforts to repeal the crypto wash sale rule have failed, changes could still happen.
Without action from Congress, trillions of tax breaks enacted by Trump will expire after 2025. The crypto wash sale rule could be revisited as lawmakers seek funding to extend key provisions, experts say.
“It may make sense to utilize it now before it goes away,” Gordon added.

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Unrelenting summer heat has made it challenging for households to stay cool.
That trend of higher temperatures is only expected to continue in coming years.
Experts say policies are needed to help families who cannot afford cooling costs.

Visitors walk during a long-duration heat wave impacting much of California on July 9 in Death Valley National Park, California. 
Mario Tama | Getty Images News | Getty Images

Amid surging summer heat, the earth reached a new hottest day on record on July 22.
That day, the global average temperature was almost 63 degrees Fahrenheit, and was surrounded by similar high temperature days.

Across the U.S. this summer, many areas have experienced unrelenting heat waves.
As a result, many Americans face a tough tradeoff between paying higher cooling costs or suffering in the heat to save money, research finds.
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This year, extreme heat is projected to lead home cooling to cost an average of $719 from June through September — up nearly 8% from $661 for the same period in 2023 — the National Energy Assistance Directors Association and the Center for Energy, Poverty and Climate estimate.
Home cooling costs have risen in the past decade as higher temperatures require more electricity.

And those higher temperatures are expected to get worse, with the U.S. by the end of the century projected to have at least 50 days per year with maximum temperatures above 95 degrees, according to new research from the JPMorgan Chase Institute.
“We’re seeing more and more high heat days and the impact of climate change,” said Heather Higginbottom, head of research, policy and insights for corporate responsibility at JPMorgan Chase. “That’s another expense that families and households have to manage.”

Some must ‘just go without cooling their homes’

Low-income households may be poised to suffer most amid rising temperatures.
During hot days, low-income households tend to go without cooling to save money. They spend 37% to 45% less on air conditioning than high-income households, JPMorgan Chase Institute found, based on an analysis of anonymized firm data.

A man walks near the Las Vegas strip during a heatwave in Las Vegas on July 7.
Robyn Beck | Afp | Getty Images

For most households, the higher electricity bills have limited effects on other spending. In Houston, an extra 95-degree day contributes to less than $1 in foregone spending for the average family, according to the JPMorgan Chase Institute’s research.
In two other cities the research evaluated — Los Angeles and Chicago — there was no statistically detectable effect.
“Lower-income households will spend less on air conditioning than middle- or higher-income households on high heat days, and essentially just go without cooling their homes as effectively for financial reasons,” Higginbottom said.
Rising energy prices have a greater impact on lower-income families because those increases take up a larger share of their budgets, according to Mark Wolfe, executive director of the National Energy Assistance Directors Association.

For a high-income family, higher energy bills may push those costs from 3% to 3.1% of their budgets, a difference that likely won’t substantially impact their lives, Wolfe said.
But for low-income families, the share of those costs in their budgets may go from 8.3% to 11%, and substantially limit their discretionary income, he said.
Those low-income families tend to disproportionately include young children, elderly or disabled individuals, which means higher heat also poses a significant health risk, Wolfe said.

‘There’s no inexpensive solution’

While policies can help those vulnerable populations, it is a race against time, as temperatures rise faster than expected, he said.
“We’re having extended periods of very high temperatures, and we’re not prepared for it,” Wolfe said.
Two policy approaches can help, according to Wolfe — immediate help for people pay their cooling bills and long-term efforts to retrofit housing for low-income families so they can access affordable and modern cooling systems.

In the meantime, many families may be at risk of shut offs if they can’t pay their bills.
Turning up the temperature on the thermostat — say from 72 degrees to 78 degrees — can help reduce cooling costs. Installing more insulation can also result in savings, according to experts.
But this summer is a “wake up call” that bigger changes need to happen, Wolfe said.
“This is going to be expensive to adapt,” Wolfe said. “There’s no inexpensive solution.” More

Maybe it’s something you’ve wondered: What happens to your student loan debt when you die?
Here are the options and protections to know about.

Artisteer | Istock | Getty Images

It’s not unusual to hear people struggling with their student loan debt bemoan that they feel like they’ll be paying until they die. Which begs the question: What happens to the debt at that point?
It may be a question increasingly on people’s minds, as the number of older student loan borrowers trends upward. There were 2.8 million people 62 and older who still carried student loan debt in the second quarter of 2024, up from 1.7 million borrowers in that age cohort in 2017, according to new data from the U.S. Department of Education.

This isn’t just a risk for older borrowers, either. Some financial experts recommend that families take out life insurance — to cover any remaining debt — even on younger borrowers with private or co-signed debt. Additionally, if your loan doesn’t discharge, some experts suggest refinancing to add a discharge policy
“We have worked with many families that have suffered the loss of a loved one who held student loans,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
Here’s what you need to know in such cases.

Federal student loans die with you

Fortunately, no one will be responsible for your federal education debt when you’re gone, said higher education expert Mark Kantrowitz.
“Federal student loans die with the borrower,” Kantrowitz said.

Any Parent PLUS loans will be discharged if the parent holding the loans dies, or if student for whom the parent borrowed dies, he added. Someone who has “endorsed” a Parent PLUS loan, which is similar to the co-signing process on a private loan, does not become responsible for the debt if the parent or student dies.

Those who’ve lost someone with student debt should ask the borrower’s loan servicer what proof they’ll need to discharge it, Mayotte said. (An original death certificate or a certified copy of the death certificate will likely be acceptable documentation, according to the U.S. Department of Education.)
While the family gathers this information, the borrower’s account should be placed on hold for 60 days, Mayotte said. If you’re unsure of the borrower’s loan servicer, you may be able to find out at Studentaid.gov.
“There are currently no taxes on this discharge, so the deceased’s estate would be free and clear of the debt,” Mayotte added.

With private student loans, responsibility is murkier

Some lenders of private student loans will cancel the debt if a borrower dies, but it is not guaranteed, Kantrowitz said. “About half of private student loans have a death discharge and about half do not,” he said. (On Kantrowitz’s website, PrivateStudentLoans.guru, he tries to keep track of different lenders’ policies.)
If the lender doesn’t offer a death discharge option, anyone who has co-signed on that loan can be held liable, Mayotte said. Even if there is no co-signer, there can be situations in which the deceased person’s estate would be held responsible for the private student loan, she added.
“In no case would family members be liable outside of the estate,” Mayotte said.

Even if a lender doesn’t offer a death discharge, someone who co-signed the loan might want to call the company and explain your situation if it would be difficult to repay it, Kantrowitz said. If you have health issues or are on a fixed income, you’ll want to point that out, he added.
“The family should contact the lender’s ombudsman to ask for a compassionate review,” Kantrowitz said. “The lenders don’t want bad press.”
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A number of states have passed protections for co-signers of private student loans, and it’s worth checking what rights you might be entitled to, experts add.
Maine Senate Majority Leader Eloise Vitelli, a Democrat, sponsored the state’s Student Loan Bill of Rights, which went into effect in 2019. The death of a woman with student loans prompted that legislation, Vitelli said. The woman’s parents reached out to Vitelli’s office, seeking help.
“They had a horrific story to tell about having co-signed their daughter’s student loans, not really knowing what they were getting into,” Vitelli said. “And then she died, and they were still being hounded by the loan servicer.”
— Additional reporting by Genna Contino.
Correction: Mark Kantrowitz’s website is PrivateStudentLoans.guru. An earlier version misstated the website’s name.

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Mortgage application payments decreased to $2,167 in June, a 2.4% decline from $2,219 in May, according to the Purchase Applications Payment Index by the Mortgage Bankers Association.
Homebuyer affordability conditions are beginning to improve, according to experts.

Sdi Productions | E+ | Getty Images

Home affordability has slightly improved for buyers this summer, according to a recent report. 
The median new mortgage payment was $2,167 in June, a 2.4% decline from $2,219 in May, according to new data from the Mortgage Bankers Association. The index measures how new monthly mortgage payments change over time, relative to income. 

A decrease in the index shows borrower affordability improved, which can happen when loan application amounts and mortgage rates decrease, or homebuyer earnings grow.
“Homebuyer affordability conditions improved for the second straight month as declining mortgage rates continue to increase purchasing power and is enticing some borrowers back into the housing market,” Edward Seiler, MBA’s associate vice president of housing economics, wrote in the release.
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Lawrence Yun, chief economist and senior vice president of research of the National Association of Realtors, also sees promising indicators for homebuyers.
“Housing affordability is improving ever so modestly, but it is moving in the right direction,” he said.

‘The bigger picture’ shows payments are still high

The median loan amount on new applications fell to $320,512 in June, from $325,000 in May, a sign that home-price growth is moderating as well, according to MBA data provided to CNBC.
A slight decrease in mortgage rates in the month of June definitely helped buyers, said Yun.
The 30-year fixed rate mortgage declined to 6.78% on July 25, down from 7.22% on May 2, according to Freddie Mac data via the Fed.

But it’s a “very small improvement” in context, he said — the typical monthly mortgage payment has essentially doubled from pre-Covid years. Before Covid, a $1,000 mortgage payment was the norm; today it’s above $2,000, he said.
“In the bigger picture, it is a substantial increase on pre-Covid conditions, yet on a month-to-month basis, it is a slight improvement,” Yun said.

More sellers, less competition for buyers

Investors think the Federal Reserve could cut interest rates about three times in the latter half of the year, which would “further improve housing affordability,” Yun added,
While the housing market isn’t yet a buyer’s market, more supply and declining rates indeed create favorable conditions for buyers, according to experts.

Housing affordability is improving ever so modestly, but it is moving in the right direction.

Lawrence Yun
chief economist and senior vice president of research of the National Association of Realtors

“The market is certainly tilting more towards buyers,” said Chen Zhao, the economic research lead at Redfin, an online real estate brokerage firm, who said the market is balancing itself.
While there’s still an affordability challenge broadly, conditions are “moving towards a more neutral market,” Orphe Divounguy, a senior economist at Zillow.
In some areas, buyers are getting pickier as more listings pop up. Total housing inventory registered at the end of June was 1.32 million units, up 3.1% from May and 23.4% from a year ago, according to NAR. Unsold inventory is at a 4.1-month supply, up from 3.7 months in May and 3.1 months a year ago.
“It’s very good news for the buyer side,” said Yun, as you’re less likely to get caught up in a bidding war.
Competition is easing fastest in the South, where all major southern markets except Dallas and Raleigh are either neutral or buyer-friendly, according to the June 2024 Zillow Housing Market Report.
“With more inventory, that does certainly mean that buyers have more options,” said Selma Hepp, chief economist at CoreLogic. “But that is very regional. And the ones with the most increases in inventories, they’re struggling with other issues,” like high insurance costs.

Some sellers are cutting prices to attract buyers, said Divounguy.
“Sellers are having to do a little bit more to entice buyers,” he said. “We see one in four sellers are cutting their prices — the most for any June in the last six years — to try to sway buyers.”
About one in five, or 19.8%, of homes for sale in June had a price cut, the highest level of any June on record, according to Redfin. That’s up from 14.4% from a year ago.
“Sellers are always trying to maximize their prices, but the sellers should be mindful that there’s more competition,” Yun said.
Home builders are also trying to attract buyers: About 31% of builders cut prices to increase home sales, up from 29% in June and 25% in May, according to a July 2024 survey by the National Association of Home Builders.
However, “the number one thing” for buyers is to “stay within budget,” Yun said. “Just because mortgage rates declined  does not mean time to overstress their budget.” More

Bill Ackman, Pershing Square Capital Management CEO, speaking at the Delivering Alpha conference in NYC on Sept. 28th, 2023.
Adam Jeffery | CNBC

Hedge fund manager Bill Ackman is looking to raise $2 billion in the initial public offering of Pershing Square USA, with 40 million shares priced at $50.
The firm will also give its underwriters the option to purchase up to 6 million additional shares, according to an announcement from the firm.

The Pershing Square USA IPO will be in the form of a closed-end fund, and is expected to hold many of the same positions as Ackman’s other vehicles. Pershing Square also has a closed-end fund in Europe, which trades at a discount to its net asset value.
The initial public offering was expected to happen early this week but was delayed on Friday. At one point, Pershing Square was looking to raise as much as $25 billion, according to the Wall Street Journal and Bloomberg News. Ackman then said in a letter to strategic partners last week that he was expecting between $2.5 billion and $4 billion. (In an unusual circumstance, Pershing Square USA then disclosed the letter in a filing and officially disclaimed it.)
Bloomberg News reported on Monday that Seth Klarman’s Baupost Group has decided against investing in the new fund. More

The 30-year fixed rate mortgage declined to 6.78% on July 25, down from 7.22% on May 2, according to Freddie Mac data.
The first Fed rate cut is becoming more certain, and rates are expected to decline throughout the year.
Here’s what it may mean for homeowners and buyers.

Valentinrussanov | E+ | Getty Images

The Federal Reserve is poised to make the first interest rate cut in years this fall, which can influence mortgage rates to go down.
Even small cuts in rates could make a meaningful difference in what a homebuyer will pay. To that point, people in the market to buy a home have been eagerly waiting for the central bank to cut rates.

The Fed is meeting this week, but experts say it seems more likely the first rate cut will come in September. That would be the first rate cut since 2020 at the onset of the Covid-19 pandemic.
While there is a less than 6% chance of a rate cut in the upcoming Federal Open Market Committee meeting, according to the CME’s FedWatch measure of futures market pricing, there is a much greater likelihood of quarter-point reductions in September, November and December.
That along with further cuts in 2025 would bring the the Fed’s benchmark fed funds rate to below 4% by the end of next year, according to some experts.
While mortgage rates are fixed and mostly tied to Treasury yields and the economy, they are partly influenced by the Fed’s policy. Home loan rates have already started to come down, in part induced by the Fed putting the brakes on rate increases.
Here’s what homeowners and buyers need to know.

Rate cuts are already priced into the market

The first rate cut is almost entirely priced into financial markets already, especially bond markets, said Chen Zhao, the economic research lead at Redfin, an online real estate brokerage firm. In other words, mortgage rates aren’t going to change much once the Fed actually begins to cut back, she said.
“A lot of these rate cuts are already priced in,” she said.
The 30-year fixed rate mortgage declined to 6.78% on July 25, down from 7.22% on May 2, according to Freddie Mac data via the Fed.

Refinance now or later?

“Refinancings are starting to tick up, it’s not a huge wave yet, but they are starting to pick up a little bit as rates start coming down,” Zhao said.
Refinance activity on existing home loans was up 15% from the previous week, reaching the highest level since August 2022, according to the Mortgage Bankers Association. It was 37% higher than a year ago, MBA found.
Whether homeowners should refinance depends in part on their existing rate, said Selma Hepp, chief economist at CoreLogic.
“There are people that originated when mortgages peaked at 8% in the fall of last year,” Hepp said. For those buyers, “there is some opportunity there.”
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To be “in the money,” or when it makes sense to refinance, homeowners need to see a notable drop in mortgage rates in order to benefit, experts say. The prevailing rate should be at least 50 basis points below your current rate. A basis point is one-hundredth of a percentage point.
While that can be a good strategy, it’s not a “hard and fast rule,” said Jacob Channel, senior economist at LendingTree.
Timing the refinance of your home will depend on factors like your monthly mortgage payment and if you can pay closing costs, he said: “There’s a lot of variability.” (When you refinance a mortgage, you are likely to incur closing costs, as well as an appraisal and title insurance; and the total price tag will depend on your area.)
“The saving has to outweigh your upfront costs,” Zhao explained.
Even if your existing mortgage has a high rate, you might want to consider waiting until the central bank is further along in its cuts, with the expectation that rates are to steadily decline throughout the year and into 2025, Zhao said.
If you are thinking about it, reach out to lenders and see if refinancing now or in the near future makes the most sense for you, Channel said.

Buy now or later?

While lower rates can come as a relief for cost-constrained homebuyers, the real effects of lower borrowing costs are still up in the air, according to Zhao.

For instance: If borrowing costs for home loans come down, there’s a chance more buyers will jump in the market. And if demand outpaces supply, prices might go up even more, she said. It can “offset the relief you get from mortgage rates.”
But what exactly will happen in the housing market “is up in the air” depending on how much mortgage rates decline in the latter half of the year and the level of supply, Channel said.
“Timing the market is basically impossible,” Channel said. “If you’re always waiting for perfect market conditions, you’re going to be waiting forever. Buy now only if it’s a good idea for you.”

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