Inflation is rising, but mortgage spreads have kept rates under 7%

"April CPI rose 0.6% and inflation is 3.8% as the 10-year yield tests 4.45%. With spreads at 1.96%, mortgage rates are near 6.52% and would be 7.10% to 7.67% under 2025 to 2023 peak spreads."

"From BLS: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent on a seasonally adjusted basis in April, after rising 0.9 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 3.8 percent before seasonal adjustment."

"Inflation was expected to be hotter in this report due to energy and food prices, but core inflation was hotter than some people expected. In fact, Fed Governor Austin Goolsebee said in an interview with Bloomberg: We have an inflation problem in this country."

"Unlike 2023, 2024 and 2025, when mortgage spreads were elevated versus historical norms, mortgage rates are still under 6.64%. I often use the term hug a mortgage spread because I don't believe people realize how much worse mortgage rates could have been in 2025 and into this year if spreads were at that level."

April CPI increased 0.6% seasonally adjusted after a 0.9% rise in March. Over the prior 12 months, all-items inflation was 3.8%. Core inflation came in hotter than some expectations, with the headline increase driven largely by energy and food. The 10-year yield tested 4.45%, and mortgage rates were near 6.52% with spreads at 1.96%. Mortgage rates would have been higher, around 7.10% to 7.67%, if spreads matched 2023 peak levels. Inflation progress toward 2% remains incomplete, and ongoing geopolitical conflict adds uncertainty to future rate cuts.

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