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5 lessons from the decline in inflation

Mortgage interest rates are likely to fall

Mortgage rates are falling, with the average rate on 30-year mortgages at 6.49 percent this week, down from a high of 7.79 percent last year, according to data from Freddie Mac. And with inflation easing, the Federal Reserve is expected to cut its benchmark interest rate next month. That would likely result in lower borrowing costs for homebuyers, homeowners looking to refinance and older homeowners looking to tap into their home equity by taking out a home equity loan or home equity line of credit.

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“The recent low and falling inflation numbers give the Fed confidence that it is on track for a soft landing, which in turn gives the market confidence that it will cut rates at its September, November and December meetings,” says Ralph McLaughlin, senior economist at Realtor.com. “The market is currently expecting a 25 basis point cut for each of those months. Some of that is already priced into the recent decline in mortgage rates, but there could be further declines if subsequent inflation numbers continue to show progress toward the Fed's 2 percent inflation target.”

That's why Realtor.com currently expects 30-year mortgage rates to settle at around 6.3 percent by the end of the year.

Credit card interest rates should also fall

If the Fed does cut interest rates in September, consumers should expect to see credit card interest rates drop. That's no small feat considering that half of all Americans carry a credit card balance each month, a recent Bankrate survey found, and that baby boomers with credit card debt owe an average of $6,648, according to credit bureau Experian.

Looking closer, the average credit card interest rate has hit a record high of 24.92 percent, according to an analysis of over 200 credit cards from more than 50 issuers by LendingTree. Lower credit card interest rates can result in big savings, depending on how much you owe and how diligently you pay off the debt.

For example, say you have $5,000 in credit card debt and you pay $250 a month. At an interest rate of 28.34 percent (the highest APR for new credit card offers, according to LendingTree), you would pay $1,848 in interest and pay off the balance in 28 months. Lower the interest rate to 21.5 percent, and you'd pay just $1,246 in interest and pay off the balance in 25 months.