Imagine the Consumer Price Index (CPI) as a special tool that helps us measure how the prices of everyday things we buy change over time. It’s like a big shopping cart filled with different items that people commonly purchase, such as food, clothing, housing, and more.

Now, let’s connect this to mortgages. When you’re buying a house and getting a mortgage, you’re making a big financial commitment. The amount of money you borrow, your monthly mortgage payments, and the interest rates you’re charged can be affected by inflation. Inflation is the general increase in prices over time. So, as time goes on, the cost of goods and services tends to go up.

The CPI helps us keep track of this inflation. It works like this: A group of people who track the prices of various items in that big shopping cart I mentioned earlier. They do this every month to see if the prices have gone up or down compared to the past.

Now, back to mortgages. Let’s say you take out a mortgage with a fixed interest rate. This means the interest rate on your mortgage stays the same over the years. But if there’s inflation and the cost of living goes up, your money might not go as far in the future as it does today. This could potentially make it a bit harder to manage your mortgage payments and other expenses.

On the other hand, if your mortgage has an adjustable interest rate, it might change based on things like the CPI. If the CPI shows that prices are increasing, your interest rate might go up too, which could mean higher mortgage payments.

So, in a nutshell, the Consumer Price Index helps you understand how the prices of everyday things change over time. This matters for mortgages because it can impact the cost of living, your monthly mortgage payments, and the interest rates you might encounter. It’s a tool that gives you a better grasp of how the economy is moving and how it might influence your financial decisions, especially when it comes to buying a home and managing a mortgage.