Mortgage rates low: After a bad jobs report caused bond prices to drop and made Wall Street more likely to think that the Federal Reserve would lower rates at its meeting in September, mortgage rates fell on Friday to their lowest level since April 2023.
A 30-year fixed mortgage rate dropped by 0.22 percentage points to 6.4%, according to CBS News.
Freddie Mac data indicates that this is the lowest average rate for the most popular home loan since April 2023.
According to a report by Mike Fratantoni, chief economist of the Mortgage Bankers Association, “the market is moving ahead of the Fed, bringing down longer-term rates, including those for mortgages, which should lead to both more home purchases and a pickup in refinance activity.”
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According to figures released by the Labor Department on Friday morning, employers added a lot fewer jobs in July than experts had thought. At the same time, the rate of jobless rose to its highest level since late 2021. Mortgage rates are very similar to 10-year U.S. Treasury yields, and the huge miss sent markets down as well.
Given the combined whammy of high borrowing costs and record-high home prices in June, many prospective homeowners may find some comfort from the market from the steep decrease in mortgage rates. According to a statement from Lawrence Yun, the chief economist at NAR, mortgage rates may drop much further in the upcoming weeks.
The yield on the 10-year bond fell by one percentage point, to 3.8% on Friday, from 4.8% a few months earlier, according to Yun. According to him, borrowers would require $300 less per month for a typical house loan if mortgage rates dropped by the same amount.
“Homebuyers who were priced out a few months ago should re-check whether they can enter the homebuying market if they have secure jobs,” he stated.
Amidst the weakening labor market, many are already speculating that the Federal Reserve would have to lower rates more significantly than initially anticipated. In contrast to earlier estimates for a 0.25 percentage point reduction, several Wall Street analysts on Friday expected that the Fed may lower its benchmark rate by 0.5 percentage points at its meeting in September.
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As anticipated, the Federal Reserve maintained its benchmark interest rate unchanged on Wednesday. However, Chair Jerome Powell hinted that the central bank may start lowering borrowing costs in September, if inflation continues to decline. However, he also mentioned that Fed policymakers are keeping a careful eye on the labor market for any indications of weakness that would point to the necessity of making cutbacks.
Wall Street analysts are now projecting multiple more rate cuts until 2024, as well as possibly steeper reductions than previously predicted, in light of the jobs data that came in weaker than expected on Friday.
“We now expect 25 bp cuts at each of the remaining three meetings this year and will be watching for signs that a larger 50 bp move could be on the cards, although that would be dependent on the economy and labour market weakening at a faster pace than we forecast,” Capital Economics reported on Friday.
