Today’s Inflation Rates and Tomorrow’s Mortgage Rates
CPI figures were just released for the month of April and inflation was up 8.3% from the previous year. This number was slightly below last month’s inflation rate, which was at 8.5%. Last month’s CPI figures were eye-popping as they were a 40-year high. So, while inflation rates are still near 40-year highs, this slight decrease is still a welcome relief for everyone. Whether you are buying groceries, gas, or even buying a house, you are feeling inflation. Hopefully, this slight decrease in the CPI might mean that we have hit a peak. How likely is it that we have hit peak inflation? If we have, what does this mean for mortgage rates and home buyers? The team at Peoples Choice Mortgage is here to help home buyers and homeowners with what will happen to mortgage raets depending on inflation.
April CPI Numbers Released
The consumer price index is a measurement of the change in prices paid by consumers. Consumer prices have been rising very rapidly in the past few months. The Consumer Price Index rose by 8.3% in April, a fairly large increase. The Consumer Price Index weighs items like gas and groceries highly because these are common items that consumers will buy. We can see that many essentials, such as gas, are increasing alongside our Consumer Price Index. The core price measure strips out groceries and gas, but it still picked up by 0.6% in April. Overall, April’s Consumer Price Index shows a general higher trend in prices.
Lucily, these numbers could point to the peak of inflation. Following the Consumer Price Index, we can see that the monthly wage growth decelerating to 0.3% from 0.5% and holding steady at 5.5% year-on-year. The Navy Credit Union also commented on this. “The peak of inflation may be behind us, but today's CPI report points to a long, slow descent or maybe even a plateau around 8% until prices start to drop significantly," said Robert Frick. Declining energy prices also point to inflation peaking. Inflation cooling off could lead to better chances of finding a home because it might mean favorable mortgage rate environments.
Mortgage Rates Stabilizing or Dropping
Mortgage rates have steadily dropped, although it is too early to tell what exactly will happen for the rest of 2022. March mortgage rates hit new highs that were not seen since December 2018. The 30-year fixed-rate average had climbed to 4.67 percent with an average of 0.8 points. These rates were indicating substantially higher costs in the market. April mortgage rates also made a climb, marching up to 5.11 percent but slipping to 5.1 percent in the month of April.
Mortgage rates have now started to slightly drop. Mortgage rates have dropped almost a quarter as of May 10th, indicating that the inflation forecast is improving. It’s important to keep track of the mortgage rates of today in case we get lower rates in the future. Low mortgage rates are great for homeowners and home buyers, alike. Lower mortgage rates can save you money on monthly payments. They can also save you tens of thousands of dollars over the life of your mortgage. For this reason, when rates are low, people want to buy homes. At the same time, homeowners take this as an opportunity to refinance existing home loans.
What Home Buyers and Homeowners Should Expect from Mortgage Rates after Inflation Peaks
If inflation peaks then the Federal Reserve will have less incentive to raise interest rates. This would mean that mortgage rate increases will become less likely. This is ideal for the average homeowner. Home buyers can get a home loan at a good rate and feel comfortable about their purchase. Homeowners can refinance their current mortgage for a good rate. Mortgage rates are higher than the historic lows they reached during the pandemic, but based on historic rates, today’s rates are still a great value. Home buyers can expect mortgage rates to not drift too far off from historic lows, but still offer a slight downward trend.
Final Thoughts
The pandemic has caused inflation to increase the price of living for Americans. With so much happening in the market, it’s important that buyers make sure they are well informed. The best thing you can do is contact us and try one of our complimentary mortgage qualifiers. This will tell you exactly how close you are to buying a home of your own. However, if you do not qualify for a mortgage today, there is no need to fret. At Peoples Choice Mortgage we believe that everyone deserves the right to own a home. Just because you do not qualify today, it does not mean that you cannot qualify in the future. Based on what we learn about your financial situation from our complimentary mortgage qualifier, we can help you. We will craft a plan that will put you on a path to homeownership.
