Weekly Mortgage Rates Rise as Tariffs’ Effects Emerge

Mortgage rates rose again this week, indicating that last week's rise — after five straight weeks of decline — may have signaled a turning point.

The average rate on a 30-year fixed-rate mortgage rose six basis points to 6.84% the week ending July 17, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Here's what's pushing up mortgage rates, and why we could see rates go higher.

Video: An update on mortgage rates

CPI comes in on target

The biggest economic news this week was Tuesday's Consumer Price Index announcement from the Bureau of Labor Statistics. CPI is a key measure of the rate of inflation. Basically, each month the BLS checks the costs of a wide range of goods and services to gauge how prices change from month to month and year to year.

The numbers for June came in pretty much as economists had predicted — a moderate increase from last month. The rate of inflation rose 0.3% from May to June, and was up 2.7% compared to June 2024. In other words, if it feels like everyday goods cost more, it's because many of them do.

There are two ways to look at these numbers. There's the glass-half-full version: Inflation's behaving as predicted, and it could be a lot worse. But it's easy to see the glass as half empty if you start looking at individual components of the CPI.

In looking at June's numbers, economists were particularly attentive to categories likely to be affected by tariffs. The current administration's on-again, off-again tariffs have repeatedly threatened to raise prices for U.S. consumers, but through the spring those threats hadn't fully materialized.

June may turn out to be an inflection point, as CPI categories that include items likely to be affected by tariffs showed accelerating inflation. The household furnishings category, which includes items like flooring and window coverings, was up 1%. Components of that category had steeper increases. Tools and hardware rose 1.2%, and home appliances came in at 1.9%.

Fed likely to hold

All of these numbers are certainly going to get attention from the Federal Reserve, which meets at the end of this month. The central bankers have been under pressure to lower the federal funds rate, the short-term interest rate the Fed controls that essentially sets the tone for borrowing costs. When people talk about the Fed cutting rates, they really mean that one rate — and the Federal Reserve has kept the funds rate steady since December 2024.

On July 1, while speaking at a conference in Portugal, Fed chair Jerome Powell acknowledged that the bankers would have already begun cutting rates this year were it not for tariffs. "In effect we went on hold when we saw the size of the tariffs," Powell said. "We think the prudent thing to do is to wait and learn more" about tariffs' impacts.

Markets were already betting that the Fed's pause would continue with the July 29-30 meeting, but after those CPI numbers dropped, the number of holdouts hoping for a rate cut dwindled. Keeping inflation in check helps the Federal Reserve achieve its mandate of price stability, and higher interest rates are its main lever for managing inflation. If the Fed takes the glass-half-empty view on the CPI data, a rate cut is extremely unlikely.

Mortgage rates heading higher

If you're thinking, "That's interesting, but I came here to read about mortgage rates," let's get into it. The CPI data and the Fed's potential actions — or inaction — give us the context we need to understand what's happening with mortgage rates.

Mortgage rates drifted lower all through June, as even though the Fed held the funds rate steady at its June 17-18 meeting, it felt like cuts could be imminent. Clearly, the vibe has shifted.

Mortgage interest rates may not be set by the Fed, but they react to the same economic ups and downs. The July 3 jobs report showed strength, and while positive for the economy, that's an argument against lower interest rates. And indeed, that news sent mortgage rates higher. Add concerns about inflation, and you've got a recipe for rates staying higher for longer.

It's tough news for folks looking to buy a home in the latter half of 2025. Higher mortgage interest rates add to affordability challenges. And tariffs and inflation aren't just concerns for the Fed — these affect household budgets, too. "Prospective home buyers are increasingly feeling the financial stress of higher prices for everyday things, which makes it harder to think about buying a home," Lisa Sturtevant, chief economist for Bright MLS, said in an email commentary.