The average interest rate on a 30-year fixed mortgage rose 27 basis points (bp) on Friday morning following the release of the government’s monthly jobs report. That rate currently stands at 6.53%, according to Mortgage News Daily.
This is 42 basis points higher than on September 17, the day before the US Federal Reserve lowered its benchmark interest rate by 0.5 percentage point. Mortgage rates don’t follow the Fed, but they roughly follow the 10-year Treasury yield.
When it comes to mortgage rates, it all depends on what the Fed expects next. As such, there was a lot of anticipation leading up to the release of this particular monthly report, as the previous two monthly reports had pointed to deteriorating labor market conditions.
“Certainly, the Fed’s decision to cut interest rates by 0.50 compared to last month’s 0.25 raises the possibility that coverage like today’s will not be available in the future,” said Matthew Graham, chief operating officer of Mortgage News Daily. “It had a lot to do with concerns and expectations.” “The only silver lining here is the idea that this is just one of the last few mostly weak jobs numbers, and maybe the next one won’t be as bad for bonds.”
However, the report slightly revised the outlook for future interest rates, as most people expected them to be lower.
“The MBA expects long-term interest rates, including mortgage rates, to remain within a relatively narrow range over the next year,” Michael Fratantoni, chief economist at the Mortgage Bankers Association, said after the employment report. “This news will cause mortgage rates to rise to the high end of their range, but we expect mortgage rates to remain near 6% for the next 12 months.”
Today’s homebuyers are extremely sensitive to interest rate trends as home prices continue to rise from previous year’s levels. Additionally, there is still very little inventory on the market, which only leads to higher prices. Interest rates are a full 1 percentage point lower than they were a year ago, but the housing market is still not that hot.
