Mortgage rates saw a noticeable increase today, reaching the highest levels we've seen since January 14th. This uptick follows the release of the latest Consumer Price Index (CPI) report, which revealed inflation numbers that were far worse than expected.
For context, January 14th was just before the last CPI report, which actually showed inflation slightly easing. Today's report, however, has caused a significant spike, indicating inflation is still running hotter than anticipated.
Mortgage rates are closely tied to the bond market, and inflation is the primary adversary for bonds. Bonds are considered "fixed-income" investments, meaning the return (interest) they pay out remains the same over time, regardless of inflation. This scenario can be tricky for investors: for example, if an investor earns $3 this month, they could’ve used that money to buy 12 eggs when inflation was lower. Now, thanks to inflation, the same $3 might only buy half as many eggs.
With inflation higher than expected, investors now demand higher returns to compensate for the reduced purchasing power of their fixed-income investments, like mortgages. As a result, lenders have raised rates to align with this shift in demand.
On average, mortgage rates climbed by nearly an eighth of a percentage point. While this increase isn't as steep as it could have been, it still signals a significant adjustment.
If you're wondering how these changes affect mortgage rates in your area, ReadySetLoan has up-to-date information on the latest programs and resources.
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