Unexpected inflation growth will feed a dramatic increase in interest rates – which will result in a huge jump in mortgage rates.

Why do mortgage rates need to go up so much?

Inflation is the main reason that economists have to raise interest rates. Increasing the interest rate should reduce inflation.

Why do you expect mortgage rates to make such a big jump?

What is being done now, is not working.

The bottom line is that a huge hole has been dug that has gotten us into this crazy inflation. The solution is going to take a much bigger jump in interest rates to even come close to dealing with the problem.

But what about what many believe is an upcoming recession?

Interest rates need to go down to fight a recession.

Right now, we are facing inflation. However, once recession begins, we will likely see a point where the Fed will reduce rates to fight recession. I do not believe that anyone should expect a return to 3% interest rates for a very long time…. perhaps not even in our lifetimes.

What a recessions causes.

Recessions are marked by rising unemployment, reduced retail activity, shrinking incomes and drops in manufacturing. All bad things for people trying to make ends meet – or pay their mortgage.

LINKS:

https://magazine.realtor/daily-news/2022/07/13/yun-bolder-fed-inflation-policy-may-catapult-mortgage-rates