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What the latest inflation numbers mean for mortgage rates
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Those who were hoping for an end to inflation — and high interest rates — may have to wait a bit longer.
That was the sentiment early Tuesday after the latest inflation report showed inflation rising 3.1% year over year. While that January rise was lower than December’s 3.4%, it was still a move in the wrong direction, strongly indicating that interest rate cuts that seemed almost imminent a few months ago will be delayed until later in 2024.
“The index for shelter continued to rise in January, increasing 0.6 percent and contributing over two-thirds of the monthly all items increase,” the Bureau of Labor Statistics said in a press release. “The food index increased 0.4 percent in January, as the food at home index increased 0.4 percent and the food away from home index rose 0.5 percent over the month.”
While elevated inflation and corresponding rates have been a boost for savers, they’ve been detrimental for borrowers, particularly those looking to buy a home. But what do the latest inflation numbers mean for mortgage rates? That’s what we’ll break down below.
See what mortgage rate you could secure here now.
What the latest inflation numbers mean for mortgage rates
The latest inflation numbers aren’t likely to have a significant, immediate impact on mortgage rates, but they’re not likely to lower them in any material way either. Toward the end of 2023, inflation was dwindling and hope was high that interest rate cuts could come as soon as March 2024. Mortgage rates benefited from that optimism and dropped by around half a point, even with the benchmark interest rate unchanged at a range between 5.25% and 5.50%.
But that was before the December 2023 report and, now, the January 2024 one, showed inflation above 3% — more than a full percentage point above the Fed’s target 2% goal. So don’t expect optimism to result in another drop in mortgage rates, at least not until more data is revealed — or until the Fed meets again in March.
Even when that happens, however, an interest rate cut may not be as likely as once hoped.
“And we, you know, want to see more evidence that inflation is moving sustainably down to 2%,” Fed chairman Jerome Powell recently told CBS News prior to Tuesday’s report. “We have some confidence in that. Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.”
Not sure what mortgage interest rate you’d qualify for? Find out here now.
What homebuyers should do now
Today’s inflation report delays any real improvement to mortgage rates, but there are still some steps buyers can take now. While none will secure them a rate close to the 3% range from the recent past, they can still save money, especially over the typical 30-year mortgage loan term. Here are three major things homebuyers should consider doing now:
- Lock in a rate: If your credit is in top shape and you’re ready to act, consider locking in a rate now, even if it’s higher than you’d prefer. You could always unlock it and lock in a newer rate, if available, before closing. Or you could refinance to a better one in the future. But by locking in a rate now you guarantee, at a minimum, that your rate won’t rise any higher.
- Apply for an adjustable-rate mortgage: An adjustable-rate mortgage will rise over time (hence the name) but it could be a smart way to get a lower rate right now. And if the market improves when that rate expires in a few years, buyers can simply refinance into the lower, locked rate at the time.
- Buy mortgage points: Mortgage points serve as a fee the buyer pays to the lender to secure a lower rate – either paid at closing or rolled into the overall mortgage loan. While points won’t lower your rate dramatically (think 6.50% today with points versus 7% without them), every dollar helps, particularly in today’s economy.
The bottom line
Homebuyers hoping for interest rate cuts may have to wait a bit longer following Thursday’s disappointing inflation report. But while rates aren’t where most buyers hope they’d be there are still ways to secure a below-average one. So consider locking in a rate today before they potentially rise further and look into an adjustable-rate mortgage versus a fixed one and, finally, talk to your lender about buying mortgage points. There is no perfect solution to today’s complex rate environment but by taking these steps buyers can improve their chances of getting a cost-effective loan, despite the latest inflation news.
The following is a transcript of an interview with Sen. Mark Kelly, Democrat of Arizona, on “Face the Nation with Margaret Brennan” that aired on Oct. 6, 2024.
MARGARET BRENNAN: Joining us now is Arizona’s Democratic Senator, Mark Kelly. He’s in Detroit this morning on the campaign trail for the Harris campaign. Good morning to you, Senator.
SEN. MARK KELLY: Good morning, Margaret.
MARGARET BRENNAN: I want to talk to you about Arizona, but let’s start in Michigan, which is where you are right now. And it is going to be such a key state to a potential Harris or Trump victory. Vice President Harris is facing challenges among black men, working class people, as well as the Muslim and Arab populations skeptical of the White House support for Israel’s wars. What are you hearing on the ground there from voters?
SEN. KELLY: Well, my wife, Gabby Giffords, and I have been out here for a couple days. We’ve been campaigning across the country, Michigan, I’ve been in North Carolina, Georgia as well. I’ll be back to Arizona here soon. The vice president was out here speaking to Muslim organizations and the Arab community about what is at stake in this election and addressing the concerns that they have. What we’re hearing, issues about the economy, about gun violence, about, you know, supporting American families and the difference between Donald Trump and Kamala Harris. You know, Kamala Harris, who has a vision for the future of this country, Donald Trump, who just wants to drag us backwards.
MARGARET BRENNAN: Today in Dearborn, Michigan, there’s a funeral service for an American man who was killed in Lebanon by an Israeli airstrike. It just underscores how that community you’re talking about out in Michigan feel some of what’s happening in a personal way to their community. Given how close this race is, do you think this war and the expectation it could escalate could cost Democrats both a seat in the Senate and potentially the presidency?
SEN. KELLY: Margaret, nobody wants to see escalation and it’s tragic when any innocent person, whether it’s an American or Palestinian, lose their life in a conflict. Tomorrow’s one year since October 7th, when Israel was violently attacked. Israel has a right to defend itself, not only from Hamas, but from Hezbollah and from the Iranians. But, you know, I and my wife, you know, we feel for the community here who’s been affected by this. And that’s why the vice president was out here earlier, a few days ago, meeting with that community.
MARGARET BRENNAN: But it’s a live issue.
SEN. KELLY: Yeah, sure. I mean, there is an ongoing conflict in the Middle East. Israel is, you know, fighting a war now on, I think it’s fair to say, two fronts and then being attacked by the Iranians as well. And, they- they need to defend themselves, and we need to support our Israeli ally. At the same time, when women and children lose their life, innocent people in a conflict, it is- it is tragic.
MARGARET BRENNAN: You do sit on the Senate Intelligence Committee and so I know you know how intense the efforts are by foreign actors to try to manipulate voters going into November. Just this Friday, Matthew Olsen, the lead on election threats at the Department of Justice, told CBS the Russians are, quote, highlighting immigration as a wedge issue. That is such a key issue in Arizona. Are you seeing targeted information operations really focusing in on Arizonans right now?
SEN. KELLY: Not only in Arizona, in other battleground states. It’s the Russians, the Chinese, the Iranians, and it’s significant. And we need to do a better job getting the message out to the American people that there is a huge amount of misinformation. If you’re looking at stuff on Twitter, on TikTok, on Facebook, on Instagram, and it’s political in nature, and you may- might think that that person responding to that political article or who made that meme up is an American. It could be- it could look like a U.S. service member. There is a very reasonable chance I would put it in the 20 to 30% range, that the content you are seeing, the comments you are seeing, are coming from one of those three countries: Russia, Iran, China. We had a hearing recently, with the FBI director, the DNI, and the head of the National Security Agency. And we talked about this. And we talked about getting the word out. And it’s up to us, so thank you for asking me the question, because it’s up to us, the people who serve in Congress and the White House to get the information out there, that there is a tremendous amount of misinformation in this election, and it’s not going to stop on November 5th.
MARGARET BRENNAN: Understood. And we will do our best to help parse that for viewers. But on the topic of the border, President Biden did announce just this past week new regulations to keep in place that partial asylum ban that he rolled out back in June. That’s what’s credited with helping to bring down some of the border crossing numbers in recent weeks. It was supposed to be a temporary policy, dependent on how many people were crossing at a time. Do you think this is the right long term policy, or is this just a gimmick to bring down numbers ahead of the election?
SEN. KELLY: Well, the right long term policy is to do this through legislation. And we were a day or two away from doing that, passing strong border security legislation supported by the vice president, negotiated by the vice president, and the president and his Department of Homeland Security, with Democrats and Republicans–
MARGARET BRENNAN: But this is not legislation.
SEN. KELLY: –This is bipartisan. This isn’t. But the legislation was killed by Donald Trump. We were really close to getting it passed. That’s the correct way to do this. When you can’t do that, Margaret, when a former president interrupts the legislative process the way he did, which is the most hypocritical thing I’ve ever seen in my three and a half years in the Senate. After that happened, the only other option is executive actions. And this has gone from what was chaos and a crisis at our southern border to somewhat manageable. And if you’re the border- Border Patrol, you know, this is this- you need this. I mean, otherwise it is unsafe for Border Patrol agents, for CBP officers, for migrants, for communities in southern Arizona. So it’s unfortunate that this was the- these were the steps that had to be taken.
MARGARET BRENNAN: Okay.
SEN. KELLY: But that’s because the former president didn’t allow us to do this through legislation.
MARGARET BRENNAN: Senator, we have to leave it right there. Face the Nation will be right back.
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Sen. Mark Kelly says Americans need to know about “huge amount of misinformation” on election
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