During the past four decades, American consumers could count on this constant: The rate of inflation remained below the average rate of a 30-year mortgage. In many past instances that’s exactly how things play out, but that’s not what’s happening today. While the rate of inflation doesn’t determine mortgage rates, the two metrics are correlated.
Inflation is one of the mortal enemies of interest rates. If dollars in the future buy less stuff than they do today, investors need to set higher and higher rates on the money they lend in order to realize the same returns. With that in mind, we’d be well within our rights to assume a surprisingly high reading on a key inflation report would push rates higher. In many past instances, that’s exactly how things play out, but that’s not what’s currently happening. Here’s the article that explains more about this.
If you’re thinking of purchasing a home or for homeowners thinking of refinancing, right now is a great time. Contact us to get the process started.