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For a while this fall, it looked like would-be homebuyers were finally going to get a break on mortgage rates. As it turns out, they might not be so lucky.
The key to the reversal in mortgage rates is that inflation fears have been revived. Lawrence Yun, chief economist and senior vice president of research for the National Association of REALTORS®, explains why inflation and mortgage rates generally move in the same direction.
"Investors who are lending money for the long term want to get a return after accounting for the loss in purchasing power from inflation," Yun says. "So the higher the inflation, the higher the return required to beat the inflation. High inflation therefore automatically means higher mortgage rates."
Of course, there is still some uncertainty as to how tariffs will be implemented and other economic factors in play. Yun sees some realities that could soften the impact of tariffs.
For example, Yun says that more targeted tariffs could have more isolated effects.
"If there are blanket higher tariffs on all goods crossing the border, then there will be higher inflation. If there are tariffs on a few select products, which are done in phases spread over many years, then there will be less upward pressure on inflation. It also depends on how much and how fast U.S. factory production can ramp up," Yun says.