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Confused about Inflation & Mortgage Rates? Let an Expert Explain

Your Digital Home Advisors

by zac folsom

How an Expert Can Help You Understand Inflation & Mortgage Rates

Keep an eye out for market fluctuations in the coming months, and you’ll know what homeowners face two of the greatest difficulties: inflation and real estate interest rates.

 If recent headlines about rising inflation are making you wonder if it’s still a good time to buy, well, it still is! Curbing the escalation of prices with a house is believed to have offered protection against inflation in recent years, experts say. 

Let’s take a look at each one and don’t let the rising inflation delay your homeownership plans. 

Inflation and the Housing Market

This year, inflation reached a high not seen in forty years. 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.

Rising inflation rates in 2022 are thought to be driven by a combination of things, including:

•   Increased demand for goods and services

•   Shortages in the supply of goods and services


•   Higher commodity prices due to geopolitical conflicts

The sudden escalation of inflation in June set a new peak in the United States. Consumer prices in the country increased the fastest since 1981, according to the U.S. Bureau of Labor Statistics.

June’s high inflation was largely due to the spike in gasoline prices, housing prices, and food.




While the Federal Reserve is working hard to lower inflation, the August data 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:

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:

 The Impact on Rising Mortgage Rates in Kalamazoo

Inflation rate does not affect mortgage rates, but they tend to move in sync. The inflation rate that affects a lending product’s provisions is usually the same one that’s impacting the cost of living. As inflation increases, upscale goods and services become more expensive. High inflation can, in turn, influence the Federal Reserve’s interest rate policy, which is connected to rates for bank loans.




Over the past few months, mortgage rates have fluctuated in light of growing economic pressures. Most recently, the average 30-year fixed mortgage rate according to Freddie Mac ticked above 6% for the first time in well over a decade (see graph ):

The mortgage rate increases this year are the big reason buyer demand 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 and priced some buyers out of the market, so home sales slowed and the inventory 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 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.”

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 possible.

Where to Go From Here

Rising inflation and higher mortgage rates have had a clear impact on housing. Housing is an asset that typically grows in value. Plus, your mortgage helps stabilize your monthly housing costs, and buying protects you from rising rents.