Mortgage rates did not drop after the jobs report
Mortgage rates were flat after a jobs report Friday showed the labor market continues to cool.
Mortgage rates for homebuyers have not changed significantly as lenders have already priced in a price Federal Reserve interest rate cut of 25 basis points (bps) expected later this month, lenders said HousingWire.
Kevin Leibowitz, president of Grayton Mortgagesaid Friday he was quoting 6.125% for a $400,000 30-year conventional mortgage without discount points.
“Rates were essentially unchanged from yesterday until noon today,” Leibowitz said. “A lot is priced in. If the jobs reports were worse than they were, market players would start pricing in a 50 basis point cut. That didn’t happen. That is why we see little movement in interest rates.”
For the same $400,000 30-year loan, a Texas mortgage lender quoted 6.35% on Friday for a Federal Housing Administration (FHA) loan and 5.5% for a The U.S. Department of Veterans Affairs (VA) loan without points or buydowns.
“Since the The yield on 10-year US government bonds is at a 52-week low, I would expect a slight pullback ahead of the Producer price index (PPI) on Thursday. A lot will depend on what the Fed will decide in a few weeks,” the loan officer said.
Ten-year Treasury yields stood at 3.72% on Friday, down from this year’s peak of 4.7% in April. Fixed-rate mortgages often correlate with the interest rate on ten-year government bonds.
“Ten-year Treasury yields are essentially flat, implying that market sentiment is unchanged and the Fed’s cuts to mortgage rates have been passed on,” said Sam Williamson, senior economist at First American. “The highly interest-rate sensitive housing sector remains sluggish due to affordability constraints caused by record high house prices and still high mortgage rates.”
Ravi Patel, Branch Manager at Umortgagetold HousingWire that mortgage bonds rose 3 basis points to 101.18 on Friday. They rose to 101.23 but remained somewhat flat throughout the day.
“Government rates (FHA, VA, USDA) hover around 6.25% with little to no discount points, dropping to 5.75% with slight costs to the borrower,” Patel said. “Some lenders have options for customers to go down to 5.25% with discount points of almost 2%. Conventional rates still hover in the mid to low 6% range, with little to no discount point fees. Some lenders price as low as 5.99%, with discount points in the 1% to 2% range.”
The average 30-year conforming mortgage rate was 6.52% on Friday afternoon HousingWire’s rates centerdown from 6.55% on Thursday afternoon.
“For rates to fall we need more weakness in economic data or spreads will start to improve after this latest rate cut today,” said Logan Mohtashami, chief analyst at HousingWire. “In terms of employment data, we are seeing some volatility. Inflation data is not as important as it used to be, but the jobs week, weekly unemployment benefits data and the Fed president’s statements can move markets.”
Federal Reserve policymakers said Friday they are prepared to cut rates after their next meeting, September 17-18, noting that now is the right time to do so.
“It is now appropriate to reduce the degree of restrictiveness in the policy stance by narrowing the target range for the Federal Funds Rate.” New York Fed President John Williams said this during a… Council on Foreign Relations event. Williams remained tight-lipped about the size of the first rate cut and how fast the pace of cuts could be.
Fed Governor Christopher Waller took a more aggressive stance.
“If the data supports cuts to consecutive meetings, then I think it will be appropriate to cut back to consecutive meetings,” said Waller, speaking at the University of Notre Dame. “If the data points to the need for greater cuts, then I will support that as well.”
U.S. central bankers have left the federal funds rate unchanged since July 2023 in a range of 5.25% to 5.5%. CME Group‘s FedWatch tool On Friday, interest rate traders appeared to be leaning towards a smaller Fed cut, with 69% predicting a 25 basis point decline at the Federal Open Market Committee (FOMC) meeting in two weeks.
HousingWire Managing Director James Kleimann contributed to this report.
