Inflation and Mortgage Rates: What 3.7% CPI Means for Buyers

Why a 3.7% inflation reading matters for housing costs

If you are weighing a home purchase, a refinance or a lease renewal, the latest inflation report matters for one main reason: it shapes what lenders charge and what a household has left after the bills are paid.

The short answer is this. September's Consumer Price Index (CPI) rose 3.7% from a year earlier, according to figures cited by the YouTube creator Michael Bordenaro Clips. That is up from 3.4% in August and above the 3.6% economists had expected. Hotter inflation tends to keep Treasury yields, and therefore mortgage rates, from falling. It also squeezes budgets when pay rises more slowly than prices. Rent and shelter costs are one part of that picture, not the whole story.

This article walks through the numbers in the video, explains how inflation connects to mortgage rates, and notes where the creator's view is contested.

The September numbers at a glance

Bordenaro's video lists a long run of price changes. Here are the main ones, as he reports them (year over year unless noted):

Some prices fell. He cites eggs down 20%, butter down 10%, prescription drugs down 4.5% and furniture down 2.4%. Those declines are real, but as he points out, they do not undo earlier increases. That is also how many households feel about home prices: cuts help, yet levels remain far above where they were a few years ago.

These figures come from the video, and the original source is the Bureau of Labor Statistics (BLS). Check the BLS release directly before relying on any single number.

Prices are outrunning pay

The creator's central point is the gap between inflation and income. With CPI at 3.7% and incomes up about 3%, real purchasing power is shrinking on the government's own measures.

He gives a simple example. A worker earning $50,000 who gets a 3% raise now makes $51,500. To keep pace with 3.7% inflation, that pay would need to reach $51,850. The shortfall is $350 a year.

He also does gasoline math. Someone who spent $300 a month on fuel a year ago, and who sees a 34.2% price rise, would now pay about $400 a month. That is roughly $1,200 more a year on a single line item. This is arithmetic on a hypothetical budget, not a measured household average.

Why your number differs from the headline

CPI is a national average of a broad basket. Bordenaro himself notes that individual inflation varies with region, commute length, home heating and cooling costs, and household size. A renter in a mild climate who works from home can have a very different year than a suburban family that drives long distances and heats with oil.

How inflation feeds into mortgage rates

This is the link most homebuyers need to understand, and the video explains it in general terms.

Mortgage rates do not follow the Federal Reserve's policy rate day by day. They are priced off long-term bond yields, especially the 10-year Treasury, plus a spread that reflects lender costs and risk. When investors doubt that inflation is under control, they usually ask for higher yields to compensate for the lost value of future payments. When that yield rises, so do rates on many mortgages, car loans and other consumer debt.

Bordenaro argues that Treasury investors are not convinced the Fed has inflation contained, so they will keep demanding higher yields. He also says the Treasury market is "well ahead of the Fed" and has been disconnected from the policy rate for a while. That is a reasonable way to describe how long-term yields can move on their own expectations.

For background on how that path could play out, see our explainer on Treasury yields and mortgage rates. For the policy side, see Fed rate holds and mortgage rates.

What to watch on mortgage rates

• The 10-year Treasury yield, published daily on FRED.
• Freddie Mac's weekly Primary Mortgage Market Survey (PMMS), the standard benchmark for 30-year fixed rates.
• Whether lenders' quoted rates move with the PMMS or lag it.

Wholesale prices and the Fed's next move

The part of the video that most worries the creator is the producer price index (PPI). He says wholesale inflation rose 6.3% over 12 months, the fastest pace since December 2022. At that time, CPI was near 9%, a few months after the Fed began its rate-hiking cycle.

His reasoning is that producers' costs usually reach store shelves later. If wholesale inflation is hotter than consumer inflation, he expects retail prices to rise further. He says that does not guarantee CPI heading toward 9%, but that it likely moves "much higher than 3.7" from here. He also ties groceries to diesel prices, saying a diesel shortage could push food costs up because most goods move by truck.

On policy, he expects the Fed to raise rates at its meeting at the end of October and says a hike is nearly certain. Because that meeting falls around the time of publication, check the Federal Reserve's own statement for the actual decision rather than relying on any prediction. Our readers should also note that he doubts a hike would change much, since long-term yields have been setting their own course.

Savings yields: a small upside

One practical point in the video is about savings. Bordenaro says one of his accounts was raised back to 4% APY. With inflation at 3.7% and taxes owed on interest, he calls the real return roughly break-even at best.

That math is broadly right in direction. Interest on a standard savings account is taxable income, so the after-tax yield is lower than the headline rate. If you are saving for a down payment, compare your account's rate with both inflation and your tax bracket, and consider whether the timeline suits a safer option such as a high-yield account or Treasury bills. This is general information, not personal advice.

Limits and counterpoints to the video

The creator makes several strong claims, and readers should weigh them carefully.

• "CPI is bogus." He says official inflation is likely double what is reported, perhaps 7.2% to 7.4%. He offers no data for that estimate in the video. The BLS publishes its methods openly, and other independent price indexes exist. Most economists see CPI as imperfect but not fabricated.
• Money supply as the driver. He says growth in the money supply is what is really driving inflation, rather than gas and heating costs. Economists debate how much money growth, energy shocks, supply chains and demand each contribute. The video does not present evidence for its split.
• Shelter vs. wages. Shelter at 3.2% is only slightly above wage growth of about 3%. That is a gap, but a small one, and shelter is a slow-moving category that blends rents, owners' costs and other housing items.
• Wholesale as a forecast. Producer prices are volatile and do not always pass through to consumers. Retailers can absorb costs, and some PPI components reverse quickly.
• Single-month noise. One CPI report is not a trend. A monthly gasoline spike of 9.1% can reverse.

What this means for you

Treat the following as general guidance, not personal financial advice.

If you are buying

• Do not wait for a sharp drop in rates that inflation data do not support. Build your budget around today's quote and test how it holds up if rates are a bit higher.
• Get quotes from several lenders and compare closing costs as well as rates. Our guide on how to buy a home today covers negotiation and fees.
• Count rising energy, transport and insurance costs in your monthly budget, not only principal and interest.

If you are renting

• Check your lease renewal date and plan for an increase near or above wage growth.
• Use a share-of-income rule of thumb to test affordability. Our piece on how much of your paycheck should go to rent shows take-home data.
• Look at utilities, since heating oil and electricity prices can add to the total cost of a unit.

If you are selling or already own

• Fixed-rate owners are insulated from rate moves on their existing loan, but not from higher heating, fuel and maintenance costs.
• Sellers should expect buyers to be rate-sensitive. Pricing realistically matters more when affordability is stretched.
• Variable-rate borrowers, including some home equity lines, should check how quickly their rate adjusts if the Fed hikes.

For the wider picture on prices, inventory and rates, see our housing market reality check.

What to watch next

• The Fed's October meeting statement and any signals on future rate changes.
• The next CPI and PPI releases from the BLS, to see whether September was a spike or a trend.
• The 10-year Treasury yield and Freddie Mac's weekly mortgage rate.
• Gas, diesel and heating oil prices heading into winter.
• Wage growth, since the gap between pay and prices is what ultimately determines household strain.

Inflation at 3.7% is not a crisis by itself, but it is a reminder that housing affordability depends on rates, rents and everyday costs together. The safest approach is to plan with your own budget, compare official data with commentary, and avoid acting on any single forecast.