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Rising Rates and Global Inflation: What to Watch for in the Mortgage Market

Rising Rates and Global Inflation: What to Watch for in the Mortgage Market

This week, mortgage rates reached the highest levels since fall, and there are several factors contributing to this increase. Let's walk through three events that occurred and what to look out for in the coming week.

Firstly, the release of the Federal Reserve's meeting minutes from February 1st caused some concern in the markets. At that meeting, the Fed raised rates by 0.25%, but Fed Chair Powell's statement that "the disinflation process has started" was seen as bond-friendly and led to lower rates. However, since then, strong jobs reports and higher-than-expected inflation numbers have raised expectations of further rate hikes, leading to higher mortgage rates. The Fed Minutes did not mention disinflation, but did acknowledge that prices had declined and that more progress was needed.

Secondly, inflation is rising abroad, with core inflation in Europe for January being revised up to 5.3%. This puts pressure on the European Central Bank to raise rates more aggressively, which could lead to higher rates in the US. However, if these economies slow down as a result of the rate hikes, it could benefit long-term rates like mortgages.

Finally, the Department of Housing and Urban Development (HUD) announced a 30-basis point reduction in the annual mortgage insurance premiums (annual MIP) charged to homebuyers who obtain an FHA-insured mortgage. This reduction will benefit an estimated 850,000 borrowers over the coming year, saving them an average of $800 annually, and will help to increase housing affordability.

Looking ahead, the Case/Shiller Home Price Index, Consumer Confidence, and Durable Orders will be released next week, along with plenty of Fed speak and news from abroad, which could impact the markets.

In conclusion, uncertainty and volatility surrounding inflation, the labor market, and the Fed's actions continue to affect mortgage rates. While long-term rates have peaked, it remains to be seen what impact events in the US and abroad will have on the markets in the coming weeks.

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Robert is your go-to Real Estate Broker Associate at SERHANT., where we redefine Global Luxury. From expansive golf course estates to exclusive waterfront havens and everything in between, Robert merges cutting-edge marketing strategies with a classic, high-touch service approach, ensuring every transaction is handled with unparalleled discretion and integrity.

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