How an Expert Can Help You Understand Inflation & Mortgage Rates

If you’re following today’s housing market, you know two of the top issues consumers face are inflation and mortgage rates. Let’s take a look at each one. #### Inflation and the Housing Market This year, [inflation](https://www.simplifyingthemarket.com/2022/05/20/dont-let-rising-inflation-delay-your-homeownership-plans-infographic/?a=713258-9a8342bcf821027012880bf1d7cccbf7) reached a high not seen in [forty years](https://www.cnbc.com/2022/06/10/consumer-price-index-may-2022.html). For the average consumer, you probably felt the pinch at the gas pump and in the grocery store. It may have even impacted your ability to save money to buy a home. While the _Federal Reserve_ is working hard to lower inflation, the [August data](https://www.nar.realtor/blogs/economists-outlook/instant-reaction-consumer-price-index-september-13-2022) shows the inflation rate was still higher than expected. This news impacted the stock market and fueled conversations about a recession. It also played a role in the _Federal Reserve’s_ decision to raise the Federal Funds Rate last week. As _Bankrate_ [says](https://www.bankrate.com/real-estate/how-fed-rate-hike-affects-housing/): > ###### **_“. . ._ _the Fed has raised rates again, announcing yet another three-quarter-point hike on September 21 . . . The hikes are designed to cool an economy that has been on fire. . .”_** While their actions don’t directly dictate what happens with mortgage rates, their decisions have contributed to the intentional cooldown in the housing market. A recent article from _Fortune_ [explains](https://fortune.com/2022/08/15/falling-home-prices-to-hit-these-housing-markets-in-2023-and-2024/): > ###### _“As the Federal Reserve moved into inflation-fighting mode, financial markets quickly put upward pressure on mortgage rates. Those elevated mortgage rates . . . coupled with sky-high home prices, threw cold water onto the housing boom.”_ #### The Impact on Rising Mortgage Rates Over the past few months, mortgage rates have fluctuated in light of growing economic pressures. Most recently, the average 30-year fixed [mortgage rate](http://www.freddiemac.com/pmms/pmms_archives.html) according to _Freddie Mac_ ticked above 6% for the first time in well over a decade (_see graph below_): [](https://files.simplifyingthemarket.com/wp-content/uploads/2022/09/26123143/20220927-MEM-Eng-1.png?a=713258-9a8342bcf821027012880bf1d7cccbf7) The mortgage rate increases this year are the big reason [buyer demand](https://www.simplifyingthemarket.com/2022/09/19/will-my-house-still-sell-in-todays-market/?a=713258-9a8342bcf821027012880bf1d7cccbf7) has pulled back in recent months. Basically, as rates (and home prices) rose, so did the cost of buying a home. That pushed on [affordability](https://www.simplifyingthemarket.com/2022/09/13/three-things-buyers-can-do-in-todays-housing-market/?a=713258-9a8342bcf821027012880bf1d7cccbf7) and priced some buyers out of the market, so home sales slowed and the [inventory](https://www.simplifyingthemarket.com/2022/08/25/why-you-may-want-to-start-your-home-search-today/?a=713258-9a8342bcf821027012880bf1d7cccbf7) of homes for sale grew as a result. #### Where Experts Say Rates and Inflation Will Go from Here Moving forward, both of these factors will continue to impact the housing market. A [recent article](https://www.cnet.com/personal-finance/mortgages/mortgage-rates-on-sep-26-2022-rates-tick-up/) from _CNET_ puts the relationship between inflation and mortgage rates in simple terms: > ###### _“As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.”_ Sam Khater, Chief Economist at _Freddie Mac_, has this to [say](https://freddiemac.gcs-web.com/node/25711/pdf) about where rates may go from here: > ###### _“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth. The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, . . .”_ While there’s no way to say with certainty where mortgage rates will go from here, there is something you can do to stay informed, and that’s connect with a trusted real estate advisor. They keep their pulse on what’s happening today and help you understand what the experts are projecting. They can provide you with the [best advice](https://www.simplifyingthemarket.com/2022/08/29/a-trusted-real-estate-advisor-provides-expert-advice/?a=713258-9a8342bcf821027012880bf1d7cccbf7) possible. ### Bottom Line Rising inflation and higher mortgage rates have had a clear impact on housing. For expert insights on the latest trends in the housing market and what they mean for you, let’s connect. Posted by [Ryan Drowne](https://www.thedavidgreengroup.com/blog/author/ryandrowne/) on September 27th, 2022 Enjoy this blog post? 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