Inflation is Up for January 2025 - What That Means For Mortgage Interest Rates and Real Estate

Inflation has risen for four straight months, and last month was no exception. The latest Consumer Price Index (CPI) report showed an overall increase of 0.5% in January, bringing the rate to 3% from 2.9% in December.

 

Many have been wondering if the Federal Reserve will cut interest rates soon, but with inflation rising yet again, the Federal Reserve has stated they “don’t see any reason to be in a hurry” to cut rates. The next Fed meeting will be on March 19, but based on current data, it is highly unlikely they will announce a cut. Instead, the next realistic rate cut might not come until September, per the latest estimates.

 

Here are some highlights of everyday cost changes from the most recent CPI report (Source: U.S. Bureau of Labor Statistics):

 

• Food: Up 0.4% month-over-month

• Eggs: Up 15.2% (a 53% increase over the last 12 months!)

• Used vehicles: Up 2.2%

• Gasoline: Up 1.8%

• Insurance: Up 2%

• Energy: Up 1.1%

Meanwhile, the prices of new vehicles, electricity, and medical care services remained flat at 0.0%.

 

 

Mortgage rates tend to rise when inflation is high because lenders adjust for the declining value of money. The Federal Reserve may raise interest rates (or keep them high) to reduce inflation, as higher rates typically lead to less spending. If inflation cools, mortgage rates could drop, making home financing more affordable. Until then, rates are expected to stay elevated.

 

In the real estate market, interest rates and housing inventory are key factors influencing home prices. While high interest rates might suggest a potential drop in prices, low inventory levels are keeping prices up.

 

For example, in Wayne, NJ, according to the NJMLS, there were only 46 active listings in January 2025, down from 53 in December. For comparison, in January 2019, there were 166 active listings. With demand still strong, sale prices continue to rise, and "bidding wars" remain common.

 

When mortgage rates eventually drop, I believe we will see one last surge in prices that will be immediately followed by an explosion of inventory hitting the market in our area.

 

Right now, if you have a 700 credit score, you can expect a 30-year mortgage rate in the 6.75% range. Every lender and personal situation is different, so I always recommend speaking with a trusted mortgage broker for personalized advice. Your credit score and down payment also impact the rate you qualify for, regardless of the market. Feel free to reach out if you’d like a recommendation!

 

You’ve probably seen plenty of headlines—or social media commentary—about the high price of eggs lately, and there’s a reason for it. CNBC explains:

 

 

In short, supply issues are driving prices up. The same pattern applies to other items impacted by shortages or disruptions.

 

If you’re thinking about buying or selling a home, staying informed is key when planning for success. Let’s talk about what this market means for you—reach out anytime!