Mortgage rates increased slightly this week as Federal Reserve official speeches, higher than expected retail sales and inflation data signaled that an immediate Fed policy reversal may not be in the cards just yet. Although inflation is cooling and the market expects that the Federal Reserve may be done raising its policy rate, core inflation is still higher than the Federal Reserve’s target. 

The recent decline in yields could also help ease financial and credit conditions – potentially supporting consumer spending. Government borrowing that’s on track to rise this year is also likely to raise demand and add to price pressures. For those reasons, monetary policy may have to remain restrictive.

So long as core inflation continues to move in the right direction, mortgage rates may finally start to level off. Less rate volatility would be welcome news for prospective homebuyers.