Mortage Rates Slightly Lower

Mortage Rates Slightly Lower



Mortgage rates fell modestly today, following a weaker-than expected report on inflation. The Consumer Price Index (CPI) measures the change in prices that consumers pay for various goods. The widely followed “core” reading (which ignores more volatile food and energy prices) fell to an annual pace of 2.2%. Economists were expecting that number to remain at 2.4%. Lower inflation is good for rates because rates are based on the bond market. Bond investors are paying a lump sum today in exchange for a fixed schedule of payments in the future. Higher inflation means the money they receive in the future may have less buying power. When inflation is expected to rise, bond investors therefore demand higher premiums–another way of saying they’re charging higher interest rates to borrowers. In the grand scheme of things, today’s improvement was fairly negligible. Most prospective borrowers will only see the gains in the form of slightly lower upfront costs (a couple hundred dollars, depending on loan size). The broader outlook for rates remains fairly gloomy. We’re near the highest levels since 2011, and it’s easier to count reasons rates might move higher as opposed to lower.

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