Mortgage Rates Surge to a Two Month Peak Following Spicy Inflation Data

Mortgage rates took an unexpected turn north this week in response to new consumer price index (CPI) data that showed inflation is still cooking. The average rate on the popular 30-year fixed loan skyrocketed to 7.14% – the loftiest level seen since early December according to mortgage rate tracker Mortgage News Daily. This unexpected surge has many buyers worried about affordability.

The latest CPI report revealed headline inflation climbed 7.9% in January on an annual basis, hotter than economists forecast. The hotter-than-expected inflation numbers caused bonds to sell off, lifting yields and along with it, mortgage rates. “There had been some hope inflation was peaking but these numbers dashed that,” said one mortgage pro. “When inflation surprises to the upside like this, it tends to rattle rate markets.”

So What Does This Mean For Home Buyers?

The jump in mortgage rates over the past week could put a damper on housing demand. At 7.14%, average rates are substantially higher compared to the beginning of the year and what buyers had grown accustomed to in late 2022. “Affordability is a real concern now,” explained one local real estate agent. “Some buyers may be priced out of the market or wait things out hoping for rates to cool off.” New and existing home sales had been on the upswing recently with falling rates boosting affordability.

Only time will tell if this recent pop in mortgage rates is just a blip or the start of a new upward trend. Much depends on inflation in the months ahead. If price pressures continue to rise unexpectedly, look for mortgage rates to follow suit. But any signs inflation is peaking could help pull rates from their new highs. The housing sector will be watching future CPI reports closely for clues on where mortgage rates may head next.