The average rate on the 30-year-fixed mortgage increased by 27 basis points following the release of the government’s monthly employment report, reaching 6.53%. This is 42 basis points higher than before the Federal Reserve’s rate cut in September. Mortgage rates do not directly follow the Fed’s actions, but they are influenced by the yield on the 10-year U.S. Treasury bond. The anticipation leading up to the monthly report was high, as the last two reports indicated weaker labor market conditions and prompted the Fed’s decision to cut rates.
The chief operating officer at Mortgage News Daily, Matthew Graham, noted that the fear and expectation of reports like the latest one being scarce in the future likely influenced the Fed’s decision to cut rates by 0.50%. While there is hope that future reports may not be as negative, the latest report has shifted the outlook slightly for rates going forward. The Mortgage Bankers Association’s chief economist, Michael Fratantoni, forecasts that longer-term rates, including mortgage rates, will remain within a relatively narrow range over the next year. The latest news is expected to push mortgage rates to the higher end of that range, but it is predicted that rates will hover around 6% over the next 12 months.
Today’s homebuyers are particularly sensitive to rate fluctuations as house prices continue to rise year-over-year. Low inventory levels in the housing market have contributed to keeping prices high. While rates are currently a full percentage point lower than a year ago, the housing market has not experienced a significant boost yet. It is important for potential homebuyers to keep an eye on mortgage rate movements, as they can significantly impact affordability and purchasing power in a market with rising house prices and limited inventory.
The trajectory of mortgage rates in the coming months will primarily depend on the Federal Reserve’s future actions and economic indicators such as employment reports. The recent increase in rates following the latest jobs report suggests that there may be less downward pressure on rates in the near future. The Mortgage Bankers Association’s forecast of mortgage rates staying close to 6% over the next year indicates that borrowers should expect rates to remain relatively stable but possibly on the higher end of the projected range due to the latest economic data.
Potential homebuyers should consider locking in their mortgage rates to take advantage of current low rates, especially if they anticipate a further increase in rates in the future. While rates are still lower than they were a year ago, the continuous rise in housing prices and limited inventory pose challenges for buyers. Keeping a close watch on economic indicators and mortgage rate movements can help borrowers make informed decisions when timing their home purchase. Overall, the current housing market presents opportunities for buyers but requires careful consideration of rate fluctuations.
