Posted To: Mortgage Rate WatchMortgage rates fell modestly today, following a weaker-than-expected report on inflation. The Consumer Price Index (CPI) measures the change in prices that consumers pay for various goods. The widely followed “core” reading (which ignores more volatile food and energy prices) fell to an annual pace of 2.2%. Economists were expecting that number to remain at 2.4%. Lower inflation is good for rates because rates are based on the bond market. Bond investors are paying a lump sum today in exchange for a fixed schedule of payments in the future. Higher inflation means the money they receive in the future may have less buying power. When inflation is expected to rise, bond investors therefore demand higher premiums–another way of saying they’re charging higher interest rates to borrowers. In the…(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Michael Ayoub, Author NMLS ID 6631