Inflation Drops, But Mortgage Rates Stay Stubborn—What Gives?

Weekly Mortgage Market Update

Author

Michael Cassano
March 17, 2025

Hello everyone - Happy St. Patrick’s Day! 🍀 

We’ve got a packed newsletter for you today and a pivotal week ahead. We'll be watching the Fed closely, analyzing mortgage rate trends, and unpacking how recent industry mergers might shape your business.

Let's dive into everything you need to know!

Read time: ~4 minutes

Rates ended HIGHER compared to last week, and volatility was HIGH. Rates are in mid to high 6’s for most loan types without paying discount points. Paying discount points can get you in the low to mid 6’s.

Inflation Drops, But Mortgage Rates Stay Stubborn—What Gives?

We got some good news on inflation last week, with two major reports showing promising signs:

✅ CPI (Year-over-Year): Came in at 2.8%, better than the 2.9% forecast.

✅ PPI (Year-over-Year): Came in at 3.2%, better than the 3.3% forecast.

Great news, right? So why aren’t mortgage rates following suit and dropping?

Here's the catch: mortgage rates don't just respond to current conditions—they’re driven by expectations about the future. Yes, inflation is trending down, but at 2.8%, we’re still above the Fed’s 2% target, leaving uncertainty around how soon (or if) we'll actually hit that mark.

And there's another wildcard: trade policy. The recent tariffs on Canadian and Mexican goods are creating uncertainty in the market. Builders are already adjusting by increasing home prices between $7,500 and $10,000. Tariffs typically boost inflation, which worries investors. So even though inflation is declining now, markets fear tariffs could reverse that trend down the road.

Bottom line? As long as uncertainty about trade policies lingers, mortgage rates could stay higher than current inflation data suggests they should be.

Key Takeaway: Inflation dropped last week, but mortgage rates moved higher. Investors are concerned tariffs could spike inflation again, which keeps upward pressure on rates. Mortgage markets trade on expectations about future events, so until tariff worries ease, rates will remain elevated.

Rocket + Redfin: Big Merger, Bigger Impact 🚀🏡

The real estate world got a shake-up last week with Rocket Mortgage acquiring Redfin for a whopping $1.75 billion. Their goal? To create an all-in-one platform for home buying, selling, and financing. It might sound great for the consumer, but what does this mean for independent mortgage loan officers and real estate agents like us?

What to Expect:

This merger creates a marketing powerhouse. Rocket-Redfin will undoubtedly leverage their deep pockets and high-tech tools to grab a bigger slice of our market share. Independent professionals should expect to feel some pressure as consumers explore this new, streamlined option.

Redfin Agents Beware:

Redfin agents might initially enjoy a surge in leads—but there's a catch. Rocket is likely to change how agents get paid, and it might not be for the better. If you're tempted to join them, take a pause. Consider how shifts in commissions and job security could affect you down the road.

How to Compete and Win:

This is our chance to highlight what mega-companies struggle to provide: personalized service, deep local market knowledge, and authentic relationships. Invest in CRM technology, enhance your online presence, and partner closely with local lenders and providers to match (and beat!) that big-company experience with your own tailored touch. Plus, let's be real—we’re already delivering better service than most of these massive companies. 😎

Key Takeaway: This merger is a sign of the times. Big changes are on the horizon, but there’s also massive opportunity. Rather than worrying, focus on your unique strengths, get tech-savvy, and build relationships. Staying adaptable now is how you’ll thrive in a market that's constantly changing.

🔥 It’s Fed Week! 🔥 📅

All eyes are on the Fed this Wednesday, March 19th, as they hold their next meeting. While no major surprises are expected, the market will be closely watching for any signals on future rate cuts. Here’s what the CME FedWatch Tool is predicting:

March Meeting Projection:

  • ✅ 98% chance of no change

  • ✅ 2% chance of a 0.25% rate cut

May Meeting Projection:

  • ✅ 71.8% chance of no change

  • ✅ 27.7% chance of a 0.25% rate cut

  • ✅ 0.5% chance of a 0.50% rate cut

Bottom line: A near-term rate cut is highly unlikely. Instead, all eyes will be on Fed Chair Jerome Powell’s speech after the meeting. While a rate cut isn’t expected this week, Powell’s commentary could spark market movement. Real estate professionals should be ready for potential volatility as investors react to any shifts in the Fed’s outlook. Stay tuned! 📊👀

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