How Does Inflation Impact Interest Rates?

🗝️ Key Takeaways

• When inflation is high, mortgage rates tend to rise.
• If inflation slows down, mortgage rates might drop.
• Pay attention to monthly inflation reports—they help predict where rates are headed.
• Lock your mortgage rate if you think inflation will push rates up.

How Does Inflation Impact Interest Rates?

Thinking about buying a home? Then you’ve probably noticed people talking about “inflation” and “mortgage rates” in the same breath. But what does that actually mean for you?

Here’s the deal: Inflation is when prices go up for things like food, gas, or rent. To fight that, the Federal Reserve raises interest rates. When that happens, mortgage rates often climb too—making it more expensive to borrow money for a house.

Every month, the government puts out a report called the Consumer Price Index (CPI). It shows how fast prices are rising. You can visit the official CPI website to learn more, or check out the latest inflation report.

The newest numbers show inflation is slowing a bit. That’s good news! It means mortgage rates may stop going up, or even go down.

What Can You Do?

• If rates are going down, you might want to wait before locking in your mortgage.
• If rates are about to rise, locking in your rate now could save you money.
• Keep an eye on inflation news—it’s a sneak peek into where mortgage costs are heading.

Inflation news may sound boring or confusing, but it affects your wallet. The more you understand it, the better choices you can make when buying a home.