Weekly Mortgage Rates Rise; Inflation Numbers Surprise Economists
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Weekly mortgage rates went up this week, with the average 30-year mortgage rate hitting its highest point since May 2024. In the week ending Jan. 16, the average 30-year fixed-rate mortgage rate rose by 13 basis points to 7.06%, according to rates provided to NerdWallet by Zillow. A basis point is one-one hundredth of a percentage point. This marks the first time in nearly eight months that the weekly average 30-year rate was over 7%.
In late 2024, the Federal Reserve was at the center of a will-they-or-won’t-they drama rivaling that of Ross and Rachel from “Friends.” Some commentators held out for good economic indicators that the new year might bring a more consistent pace of rate cuts, only to have their hopes dashed by a run of sticky inflation numbers.
The most recent core Consumer Price Index report (which measures inflation, minus the volatile food and fuel segments), released on Jan. 15, showed that inflation finally slowed slightly in December, renewing optimism that further cuts could be coming after all.
After four straight months of 0.3% gains in the core CPI, inflation slowed to 0.2% in December. These numbers fell slightly below forecaster expectations, and signaled the lowest increase in the core CPI since July 2024. Following the release of the report, surging stock futures reflected the market’s growing confidence that rate cuts are coming — eventually.
That’s not to say we’ll see any real action this month, as interest rate traders are still overwhelmingly betting that central bankers will vote to hold rates steady at the Fed’s Jan. 28-29 meeting.
“But we expect that a March cut remains on the table, with today's CPI providing reassurance that inflation data surprises are not all in one direction,” wrote Leslie Preston, managing director and senior economist at TD, in a report following the Jan. 15 release.
New administration, new economic concerns
This latest release marks the last CPI report to measure Biden-era policy results.
“Next week will also bring a deluge of policy shifts from the incoming Trump administration, giving the Fed plenty to think about as it heads into its deliberations,” wrote Preston.
It makes sense the Fed may feel compelled to take a wait-and-see approach to incoming fiscal policy changes. While the Fed currently operates independently (meaning that President Trump can’t direct central bankers’ decision-making), the Fed will inevitably have to respond to any economic impact from the new administration’s promised tariffs and immigration stance.
Fed Chair Jerome Powell declined to make specific predictions about anticipated challenges under the new Trump administration during his December press conference, though he did say that he feels "very good about where the economy is,” and expects "another good year.”
However, in the minutes released from the meeting on Dec. 17-18, 2024, Fed participants noted uncertainty around the timeline for meeting their 2% inflation target, citing “the effects of potential changes in trade and immigration policy.”
What this all means for mortgage rates
Lenders will look at the December data and determine how far they expect the Fed to be swayed, if at all. If confidence mounts that the Fed will cut rates again, then lenders could act accordingly and lower mortgage rates in anticipation. If forecasters continue to bet that the Fed will hold rates steady until further good data comes in, then mortgage rates will probably continue to hover around 7%, where they’ve been all month.
