Mortgage rates have been volatile in 2022. Most of that volatility has played out in the form of higher rates. The past 2 weeks have been a notable exception. To understand why this is happening, we first need to consider that higher inflation means higher rates. It was easy to forget that for most of the past decade, but impossible to escape since early 2021, and especially since early 2022. Several big jumps in inflation have forced the Federal Reserve to drastically tighten policy. One of those policies had been to buy lots of bonds, including those that specifically underlie the mortgage market. More bond buying demand = lower rates. As the Fed backs out, rates are hit with the double whammy of high inflation and less buying demand. The resulting surge had covered enough ground by early May that it was time to consider the possibility that they’d topped out indefinitely. That may have proven to be the case were in not for a duo of hotter-than-expected inflation reports in the EU and US. The latter (the Consumer Price Index or CPI) was particularly troubling. It happened on June 10th and was responsible for the rapid spike up in 30yr fixed rates up into the 6’s. Fast forward 3 weeks and rates are just now back to the levels seen on June 10th. The following chart includes the often-cited, but frequently misleading weekly rate survey from Freddie Mac in addition to actual daily averages for top tier 30yr fixed rate quotes. Volatility!