Inflation rose in July. Here's what that means for mortgages

Following a year of cooling prices, inflation rose in July, the Labor Department announced on Thursday. Inflation ticked up by an annual rate of 3.2% in the month, partially due to higher costs for housing and food. 

"The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90 percent of the increase, with the index for motor vehicle insurance also Contributing," the Labor Department said. The uptick was the first since June 2022.

Persistent inflation has been dealt with via consistent rate hikes by the Federal Reserve, the latest of which marked the highest rates have been in 22 years. So with inflation ticking up once again, will rates again head upward? Or will they stay put? 

And what does Thursday's news mean for mortgages, a spot in the financial sector that has been particularly hard hit by higher rates? Start by exploring your mortgage options here now to see what rate you qualify for.

What the new inflation report means for mortgages

Simply put: It's too early to tell if July's inflation increase was a minor bump in the road or a sign for the future battle against higher costs. Prior to the announcement, most experts were predicting a soft landing and an eventual (albeit slow) return to normalcy. And, after the announcement, many were still of the same mindset.

"Overall, the underlying details of the July CPI inflation data are consistent with ongoing progress on disinflation," Gurpreet Gill, global fixed income macro strategist at Goldman Sachs Asset Management, told CBS News. "Although core services inflation trended higher on the month, other component-level trend are evolving in line with our expectations."

Prior to Thursday, many predicted that the Federal Reserve would keep interest rates steady over the next few months before potentially dropping them later this year or into 2024. Lower interest rates would certainly be welcome for buyers looking for a new home or owners looking to refinance their existing one. How the new inflation report affects that forecast — if it even does — isn't exactly clear.

"If the Fed stops raising because the data shows the economy weakening and inflation coming down further, then I would expect mortgage rates to decrease during the second half of 2023," Peter Idziak, senior associate at Polunsky Beitel Green, recently told CBS News.

Speaking prior to the July inflation report, Mark Fleming, Chief Economist at First American Financial Corp, said it was possible rates would fall in 2024. But that isn't as clear now as it was before the latest inflation news.

If you're considering buying or refinancing then it may make sense to lock in a rate as soon as you can. Start by exploring your rates and options here now.

Advantages to homebuying now

While it may not be advantageous for many (or even most) to buy a home now, for others it can still make sense to act. Here are two major benefits to buying a home now:

• You may be able to make a greater profit: Rising interest rates have had mixed results on the larger real estate market, with some portions of the country actually experiencing a rise in home values. If you live in one of these regions, you may be able to make a greater profit than you thought by selling now — and using that money to buy a more expensive home.
• You can start reaping the benefits of an investment: If you're renting, then you're not reaping the benefits a home investment can provide, even if rates are higher than they had been. The sooner you purchase a home, the sooner you can start investing your money in something that historically has great returns. Plus, you'll have tax benefits to take advantage of when you file your returns next spring.

The bottom line

While the latest inflation report didn't have the news most had hoped for, it's still too early to tell if it was just an anomaly or an indicator of poor economic news to come. Because of this, the forecast for mortgage rates is still unclear, although early indications seemed to imply that the expectation of a rate drop later in the year or in 2024 wasn't completely off the table, either.

Not sure what rates and terms you'd qualify for? Find out more here now!