Mortgage rates hit 2-month high after week of sticky inflation data

Mortgage rates rose to a two-month high after government data released this week showed producer and consumer prices in January were higher than expected, prompting the Federal Reserve to The outlook for interest rate cuts in the near future has further diminished.

The average interest rate on a 30-year fixed mortgage reached 7.14%, Friday’s announcement said. daily mortgage news. Mortgage rates rose to 7.13% on Tuesday after the new Consumer Price Index (CPI) came in better than expected.

Inflation fell to 3.1% in January, according to the latest data from the Bureau of Labor Statistics, well below the 9% peak in June 2022, but still short of the Fed’s 2% inflation target. far cry.

The producer price index (PPI), which measures changes in prices paid to U.S. producers, rose 0.3% from December to January, beating expectations for a 0.1% rise.

Eugenio Aleman, Chief Economist at Raymond James “This could create further headwinds for the market.”

“The CPI report released earlier this week was also disappointing, but final demand PPI came in better than expected in January,” he added. “The report shows that while goods prices remain under pressure, there are very strong price pressures on the services side of the economy.”

The central bank has raised interest rates 11 times since March 2022 with the aim of curbing inflation, and the rise in mortgage rates has reached its highest level in more than 20 years.

Mortgage rates peaked above 8% in October, according to the Daily Mortgage Index. Interest rates dipped below 7% in December after the central bank signaled plans to cut rates this year, but have risen again on new data showing the persistence of inflation.

High interest rates are discouraging the average homebuyer. So far this year, mortgage applications are down in more than half of states compared to the same period in 2023, according to Freddie Mac data.

Meanwhile, investors bought a record 26.1% of affordable homes in the fourth quarter of 2024, according to a recent report from real estate firm Redfin.

“Rising home prices and mortgage rates, coupled with low rents, are making affordable housing increasingly attractive to investors,” the company said in a statement.