Nearing a Break in Inflation?

As we move into the final quarter of 2022, the key question on people’s minds remains inflation.

It is widely expected that we will start to see inflation moderate as we move into 2023. The challenge with the way inflation is reported is that the headline number states an annual rate, which could be rising even as the monthly pace of inflationary growth is slowing. Friday’s Consumer Price Index (CPI) report will confirm if we are still on a downward trajectory in longer-term inflation. There is a strong likelihood that the annual rate of inflation moves a bit higher, which will not be a good thing for mortgage interest rates.

Last week’s Mortgage Application report confirmed that application volume fell by 14% from the week prior and is now at a 22-year low. At some point, the steep downward trajectory will stabilize and eventually move higher. When this happens, it could help add strength to the struggling housing market.

Although the graph shows a more narrow timeframe, the last time the market hit this low of a mortgage application level, it was quickly followed by a strong move higher. Let’s hope that happens once again.

This week could be a challenging one for mortgage interest rates.

Not only do we have the CPI report on Thursday, tomorrow we will have a critical bond auction as well as the release of the Federal Reserve Meeting Minutes from the meeting last month. All of these could add volatility to the mortgage interest rate market.

Therefore, locking is the safe play.