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Will mortgage rates fall after this week's inflation report?

Mortgage interest rates could change depending on this week's inflation report. Getty Images

While the Federal Reserve won't meet again until June, and thus, a formal adjustment to interest rates won't happen until then, it doesn't mean that May will be uneventful. Observers will instead turn to the Bureau of Labor Statistics as they prepare to release their inflation report for April. What that report shows (or fails to show) will go a long way toward determining what next actions the Federal Reserve will take.

That noted, the Fed doesn't directly dictate the rates that private lenders offer. As such, lenders could adjust what they provide borrowers as soon as this week, partially based on what numbers come out of Wednesday's report. And homebuyers, in particular, will be paying close attention. Thanks to inflation and higher interest rates, buyers have been coping with the highest mortgage interest rate climate in decades. But will those rates finally fall after this week's inflation report? Or are they likely to remain elevated? That's what we will break down below.

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Will mortgage rates fall after this week's inflation report?

In short, if inflation drops according to this week's report, mortgage interest rates may drop, too. But if they rise, rates on mortgages may go up even absent a formal Federal Reserve move, based on the assumption that the Fed will soon raise interest rates yet again. However, this is a broad analysis and subject to argument. By looking at recent mortgage rate performance post-inflation reports, there hasn't been a direct correlation between an increase in inflation and a corresponding increase in mortgage rates. Let's look closer:

  • January 2024: The report released on January 11 showed the inflation rate rising in December 2023 to 3.4% from November's 3.1%. According to Mortgage News Daily, the rate on a 30-year fixed mortgage then dropped from 6.72% on January 11 to 6.69% on January 12.
  • February 2024: The February inflation report (for January) showed inflation at 3.1%, below December's 3.4%. The mortgage rate for a 30-year fixed loan was 7.13% on February 13, the date of the report's release, but it dropped to 7.09% the following day.
  • March 2024: March's report showed inflation increasing slightly from 3.1% in January to 3.2% in February, except this time the opposite occurred. The rate for a 30-year fixed mortgage went up from 6.92% on March 12 to 6.94% the following day.
  • April 2024: The April 10 report saw inflation spike from 3.2% to 3.5%. Mortgage rates again rose in tandem, going from 7.34% that day to 7.37% on April 11.

Looking at this data from early 2024, then, buyers should take some comfort in knowing that a rise in inflation doesn't automatically equate to a rise in rates. In fact, rates may even drop slightly, as was the case in January and February. That said, rates rose in the last two months as inflation increased, and it's certainly possible (if not likely) that the pattern will hold this week if another inflation report comes in hot. 

That's why buyers who are ready to act should strongly consider locking in a rate now. They could always unlock it and relock it to a lower one before closing — or they could refinance in the future. But today's rates are fleeting, so it may make sense to act before the Bureau of Labor Statistics releases their new inflation numbers.

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The bottom line

If homebuyers are looking toward this week's inflation report for a reduction in mortgage rates, they may be disappointed. Recent data has been uneven regarding interest rate response to negative inflation news. Instead, buyers should consider acting now to lock in a competitive rate before they go higher. While today's 7% rate may not be considered "low," especially when compared to rates of the recent past, they may be preferential to what's still to come. 

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