November 17, 2022 at 10:02am | Bob Myers
Hope for relief from rapidly rising mortgage rates was revived this week when October inflation numbers came in lower than expected.

Consumer prices continued to increase last month, but at a slower pace than at any other point this year. The latest report from the Bureau of Labor Statistics indicates that year-over-year inflation fell to 7.7% in October, half a percentage point lower than the September reading of 8.2%.

The lower reading means that the Federal Reserve may finally ease up on its aggressive campaign to tame inflation, says Lisa Sturtevant, chief economist at Bright MLS, the listing platform that serves the Mid-Atlantic region.
“I think they’re starting to see interest rate hikes have the intended effect,” says Sturtevant, allowing the Fed to “back off those regular increases to the federal funds rate.”

Therefore, it is expected that mortgage rates could stabilize. Mortgage rates, as measured by Freddie Mac, have increased on an almost weekly basis since the beginning of the year and are currently above 7% — nearly 4 percentage points higher than they were during the first week of January. Half that increase has been just since August, a period when rates have been particularly volatile. (The news had an immediate effect on daily mortgage rate measurements, with Money’s average 30-year rate tumbling by more than half a percentage point between last Wednesday and Thursday.)

Nevertheless, Sturtevant doesn’t see mortgage rates dropping far from their current level for the time being. “All those factors that are propping up mortgage rates are still going to be in the ether,” adds Sturtevant.
Rates stabilizing around 7% may not sound like good news, but it’s a far better scenario than might have played out if inflation kept climbing.

The Fed indicated it would continue making large interest rate hikes until inflation showed signs of slowing, which Sturtevant says, would likely have pushed mortgage rates toward 8%. Now, the Fed is more likely to make a smaller increase at its December meeting and mortgage rates are more likely to stick to a narrow range.

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