Mortgage rates are sitting close to 7% as buyers head into a big week for inflation news. Here is what moved rates last week, why Tuesday’s CPI report matters, and how it could change your monthly payment.
Where mortgage rates stand right now
The average 30-year fixed mortgage rate came in at 7.18% in Freddie Mac’s latest weekly survey, down from the week before. Daily rate trackers such as Mortgage Daily showed rates a bit lower, around 7.09% on Thursday, the lowest level in about six weeks. That is a small break after rates peaked near 7.46% in early October.
Home loan rates tend to follow the 10-year Treasury yield, which is basically what the US government pays to borrow money for ten years. According to ETF Trends, that yield ended the week at 4.86%, while the 2-year yield finished at 4.51%. Lenders add their own cushion on top of the 10-year yield, so when Treasury yields move, mortgage quotes usually follow within days.
Why rates bounced around last week
It was a choppy few days. Bond prices rose and yields fell early in the week after the midterm election results and a sharp sell-off in technology stocks, because nervous investors often move money into safer Treasuries. We covered that stock market drop in our S and P 500 worst week analysis.
Then Friday’s jobs report pushed in the other direction. Employers added far more jobs than forecasters expected, and the unemployment rate stayed low. A strong job market can keep inflation warm, which makes it harder for the Federal Reserve to cut rates. Traders now see roughly a three in four chance of a quarter-point Fed rate hike in December, as we explained in our jobs report and Fed rate hike article.
The CPI report is the next big test
On Tuesday, November 10, the government releases the Consumer Price Index for October. CPI measures how fast everyday prices are rising, from groceries to rent to gas. If prices rose faster than expected, investors may bet on higher interest rates for longer, and the 10-year yield could climb back toward 5%. A softer reading could pull yields and mortgage rates down a little more.
Keep in mind that bond markets will be closed on Wednesday for Veterans Day, so there are only four trading sessions this week. Fewer sessions can mean sharper moves on the days that are open.
What it means for your money
Small rate changes add up over a 30-year loan. On a $400,000 mortgage, a rate of 7.18% means a principal and interest payment of about $2,710 a month. If the rate rises a quarter point to 7.43%, that payment jumps to roughly $2,778, or about $68 more every month and over $24,000 more across the life of the loan.
If you are shopping for a home, ask your lender to re-run your quote after the CPI report, and find out how long a rate lock lasts. If you already have a mortgage near 7%, keep an eye on refinancing only if rates fall well below what you pay now, since closing costs can eat up small savings. Paying down high-interest credit card debt first is often the better move.
Want to talk it through with other investors? Join the conversation with our community at Smart Money Watch Social and share how you are handling rates.
Sources: Freddie Mac, Mortgage Daily, ETF Trends, US Treasury, Bureau of Labor Statistics.
Not financial advice. This article is for education only. Always do your own research or talk to a licensed professional before making money decisions.
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