Good CPI Data and AI Disruption Fears Bring Lowest Rates since 2022

Despite a better than expected jobs report, we saw mortgage rates fall quite a bit last week - first over fears of just how much AI could disrupt the economy and labor market and then after CPI unexpectedly dropped to striking distance of the Fed's 2% target.

The average rate on a 30-year fixed rate conventional loan dropped last week to 5.97%. It's the first time we've been below 6% since September 2022. See what rates we're offering by signing up for our Friday rate texts.

Our LendFriend Learning Center now has over220 articles to help homebuyers buy with confidence. Check out our top articles of the week at the bottom of this email.

TheJanuary Jobs Report: A Small Speed Bump for Rates

January's jobs report came in well above expectations, with nonfarm payrolls adding 130,000 jobs —more than double the Dow Jones consensus estimate of 55,000. As usual these days, health care jobs led the way with 82,000 new positions, followed by social assistance (+42,000) and construction (+33,000). The unemployment rate also ticked down to 4.3%, better than the 4.4% forecast. On the surface, it looked like bad news for anyone hoping for lower mortgage rates.

But the details tell amore nuanced story. Federal government jobs fell by 34,000 as DOGE-related deferred resignations rolled off the payroll, and the BLS confirmed prior job counts were overstated by 898,000 jobs for the year ending March 2025, which makes you wonder how much this month's jobs numbers were overinflated. The labor market is, at best, stabilizing, not accelerating.

AIFears Rattle Wall Street — and Push Mortgage Rates Lower

Last week, a wave of AI disruption fears sent stocks tumbling across multiple industries. What started as a selloff in software stocks quickly spread to wealth management, logistics, and transportation, as investors started asking uncomfortable questions about how many high-fee service jobs AI could eventually replace. The S&P 500fell 1.4% on the week, the Nasdaq dropped 2%, and the Dow slid 1.2% — the kind of broad-based selloff that signals real investor anxiety about where the economy is headed.

For homebuyers, here's why that matters: when markets price in economic disruption or a slowdown, investors flee to the safety of U.S. Treasury bonds. That surge in demand pushes Treasury yields lower — and mortgage rates follow. The logic is straightforward: a weaker or disrupted economy means the Fed will likely need to cut rates to provide support, and markets move ahead of that.The AI selloff wasn't a random gift to homebuyers — it was a signal that the economy may need help, and rates responded accordingly.

CPIDrops to Striking Distance of the Fed's 2% Target

Friday's CPI report was the best news homebuyers have gotten in a while. January inflation came in at 2.4% annually — below expectations and the lowest since May 2025. Core CPI hit2.5%, its lowest since April 2021, and shelter costs — the most stubborn piece of the inflation puzzle — finally cooled to 3% annually. For the first time in years, inflation is genuinely within striking distance of the Fed's 2% target.

Markets responded exactly the way homebuyers were hoping. Treasury yields fell, mortgage rates dropped, and futures traders immediately raised the odds of a June Fed rate cut to 67.2%. The path to lower rates just got a lot clearer.

What to expect this week? 

This week's calendar is packed with data that could move mortgage rates in either direction.

Wednesday, February 18 is the busiest day, bringing a flood of delayed reports including housing starts, building permits, and durable goods orders for both November and December. We'll also get the minutes from the Fed's January FOMC meeting at 2pm. Markets will be parsing every word of the minutes for clues on the timing of the next rate cut.

Thursday, February 19 brings initial jobless claims (expected at 220,000) and the U.S. trade deficit data. Jobless claims have been quietly creeping higher, and another weak reading would reinforce the case for cuts.

Friday, February 20 is the week's main event. We get Q4 GDP, personal income and spending, and most importantly — PCE inflation, the Fed's preferred inflation gauge. Core PCE is expected at 2.9%year-over-year. After last week's encouraging CPI print, a soft PCE reading could be the catalyst that pushes rates even further below 6%.

Bottom line: The FOMC minutes and PCE report are the ones to watch. If the Fed's tone is dovish and inflation keeps cooling, the momentum toward lower rates should continue.