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It’s hard to avoid bad news about rising mortgage rates in 2022, but you can’t believe everything you read.  It is true that mortgage rates have been surging higher in 2022.  A previous article (read it here) goes into greater detail about the root causes, but in a nutshell:

  • the pandemic pushed rates significantly lower at first
  • the Fed was very aggressive in stimulating the economy via low policy rates and bond buying that lowered long-term rates
  • inflation began to pick up due to supply chain issues and surprisingly resilient demand
  • but the Fed continued providing accommodation for several reasons including uncertainty over covid variants, an updated inflation framework that allowed for more inflation, and the mistaken assumption that inflation would calm down more readily than it has
  • the Fed finally began to tighten policy in late 2021, and got incrementally tougher over the following months
  • the Ukraine war caused a quick head fake that initially helped rates recovery, but it was followed by a surge in inflation concern that caused the Fed to signal even more aggressive policy tightening

That’s the saga of 2022’s rate spike in a nutshell, but pictures do it more justice.  Here’s how inflation looks, both in monthly and annual terms:

 

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