You may be hearing a lot about inflation over the next few months. Reduced economic activity caused by the pandemic has led to a decline in inflation. This slowing of inflation has played a role in record low mortgage rates. However, investors are now concerned that the trend may have reversed and inflation may be heading higher.
Independent of mortgage rates, inflation directly affects debt-to-income ratios. As inflation rises, the cost of life necessities rises. When you have to pay more for groceries, heat, water, electricity, car payments, and so on…you have less money in the budget for a mortgage payment. An increase in inflation causes the cost of houses to increase as well.
Conventional thinking says that a low inflation rate can bring down mortgage rates. It is a bit more complex than that. If inflation is too low, it could mean that the economy is stalling. This is what happens when consumers don’t have enough money to spend. A weakened economy and low consumer spending can lead to higher unemployment rates as businesses aren’t bringing in enough money due to low consumer spending. When businesses struggle, they downsize and employees are laid off.
What does this all mean for you? It means that now is an excellent time to refinance a home or begin the process of looking for your new home. The rates are low, and inflation is still in a decent spot. Feel free to reach out to Scott Bennett at 503-703-4699 or firstname.lastname@example.org to talk about your current situation.