Inflation Data Pushes Mortgage Rates Higher After Days of Stability

After several days of relative stability in the midst of broader financial market turmoil, stronger-than-expected Valentine’s Day inflation report helped push mortgage interest rates to their highest point in almost four years this week.

The average prime 30-year fixed mortgage rate quoted on Zillow increased by almost 10 basis points on Wednesday to 4.27 percent, touching their highest levels since April 2014.

Stronger inflation -- which has been an unexpected weak point in incoming economic data – should give the Federal Reserve more justification for raising interest rates, perhaps now more quickly than had been anticipated.

Financial markets continued into their second week of volatility as investors assess the implications of looser fiscal policy. After a brief government shutdown on Friday evening, Congress enacted a 2-year federal budget. But there is growing consensus that fiscal stimulus from the combination of recent tax reform legislation and higher spending under the newly passed budget could overheat the economy, which in turn would hasten the onset of the next recession.