Inflation is finally slowing down. Will rising mortgage rates do the same?

Some troubling news: For prospective buyers whose home searches have been thwarted or delayed by rising mortgage rates, the housing market is likely to get worse before it gets better.
Mortgage rates are expected to continue rising after new indicators showed inflation rose 7.7% year over year in October, according to a Bureau of Labor Statistics report released Thursday. The US Federal Reserve raised its interest rates in an all-out war against stubbornly high inflation, which led to an increase in mortgage rates.
The increases appear to be working as inflation eased slightly from 8.2% year-on-year in September. But it was still high enough that the Fed is expected to continue to shock the economy with further rate hikes that push the country to the brink of recession.
When the Fed raises its interest rates, mortgage rates usually follow suit - much to the chagrin of homebuyers. These high mortgage rates have priced many first-time buyers out of home ownership, while others have had to drastically reduce their budgets and expectations.
"The drop may not be enough to allay concerns about where the economy — and interest rates — are ultimately headed," Bright MLS chief economist Lisa Sturtevant said in a statement. "Even when interest rate increases begin to slow inflation, the Fed will continue on the path of continuing interest rate increases. As a result, we should expect mortgage rates to remain high as well."
Mortgage rates have more than doubled since the start of the year, jumping from 3.22% in January to 7.08% in the week ended Nov. 10, according to Freddie Mac. These were average and weekly rates for 30-year fixed-rate mortgages.
Home buyers today pay about 81% more each month than they did just a year ago. This takes into account the median home prices for the month of October as well as the average mortgage rates in the second week of November this year and applies to 30-year fixed-rate loans.
"The desire for homeownership is strong, but purchasing activity is still well below last year's levels when rates were lower," said Bob Brockmitt, president and CEO of the Mortgage Bankers Association, in a statement. "Many potential buyers are waiting for the volatility in mortgage interest rates to decrease, as well as for a clearer picture of the economic outlook."
Still, there were some bright spots in the inflation report that could bode well for buyers in the housing market. Annual inflation fell to 7.7% in October, down from 8.2% in September. And from September to October, inflation rose by only 0.3%. If inflation continues to slow, at some point the Fed will stop raising interest rates and mortgage rates should fall.
"Could be better? Sure," says Realtor.com® Chief Economist Danielle Hale. "The inflation figures are a glimmer of hope. It's not a big, bright burning fire, but it starts with a flash."
She predicts that mortgage interest rates will continue to rise, but will not reach 8%. And early next year, it predicts that inflation could drop enough that the end of those rate hikes could be in sight.
The October inflation report is "still not enough" to deter the Fed from raising interest rates, Hale says. But these increases are "not forever".