The bottom line is that, if you're home-shopping this spring, or thinking of refinancing your mortgage, you might as well go out and lock in a rate right now. A week ago, the Fed made its fifth interest-rate cut of the year, dropping the federal funds rate a half percentage point to 4 percent, down from 6.5 percent at the start of the year.
Inflation is bad for bonds because it makes a bond's fixed interest payment less valuable.
So investors demand a higher bond rate when inflation is a threat. But all this isn't bad news for mortgage hunters. While it doesn't seem likely that fixed mortgage rates will fall anytime soon, they remain at historically low levels. The 30-year rate averaged 8.64 percent a year ago, Freddie Mac says. If rates were to fall, they would probably fall very little.