“Mortgage rates increased this week on higher than expected inflation data,” said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. “The US economy has been resilient despite high interest rates. These strong inflation numbers will also likely delay any potential Federal Reserve rate cuts.
While disinflation appears to be stalled, this is likely just a bump on the road. The recent rise in energy prices is likely to ease. Although prices for transportation services – car maintenance and insurance – accelerated in March, the uptick was likely temporary. New and used car prices actually fell last month. Housing inflation has also continued to move lower.
Treasury yields, which mortgage rates tend to follow, reflect expectations about future inflation and future economic growth. Higher economic growth and perhaps less or slower disinflation could keep yields and mortgage rates elevated.
Expect more rate volatility ahead as the Fed and investors wait for more conclusive evidence of a return to low, stable and more predictable inflation.”
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