Mortgage rates inch closer to 8% as housing costs weigh on inflation

Mortgage rates climbed for the 5th straight week, with the 30-year fixed average nearing 8% as the Fed battles shelter inflation. Yahoo Finance’s Dani Romero reports on the continued housing cost increase and how both consumers and investors are responding.

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Video transcript

JULIE HYMAN: Mortgage rates climbing for a fifth consecutive week. Yahoo Finance's Dani Romero is here now with the numbers. Dani, we're not quite at 8% yet, but we keep getting closer.

DANI ROMERO: Julie, another blow to potential home buyers. Freddie Mac reported that the 30-year fixed mortgage rate hit 7.57% this week compared to last week where it was 7.49%. Like you said, we are getting closer and closer to that 8% squeezing purchasing power. And again, it's important to highlight that this is the ninth consecutive week where mortgage rates have hovered over 7%.

The misery of a high interest rate environment is likely not going to go anywhere, but it's not all bad news. Household incomes continue to grow. But looking ahead, taking into account housing data, buyers are still bummed out about the housing market right now given the higher interest rates.

Another thing to point out is Fannie Mae came out with a survey that says that 84% of their respondents said that it is a bad time to buy a home. Another similar share say that they expect that these higher rates are likely going to continue to this elevated pace. So really no relief ahead, Julie.

JOSH LIPTON: And Dani, CPI showing housing costs jumped the most in months. What does the shelter component of CPI signal ahead on that housing front?

DANI ROMERO: Josh, housing costs are still frustrating the Fed's fight against inflation. The shelter index from the CPI report came in at 0.6% increase over the last month. Also, it hit a 7.2% on a yearly basis in September.

So once again, another big contributor to the monthly increase in inflation. And some reaction from Wall Street, some economists have been that the results of the shelter index was a lot larger than expected. Some economists were expecting some disinflationary momentum given the fact that real-time data shows that rents have come down, have flattened out on a yearly basis. But remember, CPI is a lagging indicator from real-time data.

So what does this mean looking ahead? Some economists expect that the rent portion of CPI, which is a little over 7% of the CPI number, some economists are expecting a 0.5% increase on a monthly basis. And we can start seeing some of that downward pressure in the shelter component as soon as October, November, and December of this year. Josh.

JOSH LIPTON: Dani Romero, thank you so much.