Mortgage Rates Drop to 16-Month Low After Disappointing Jobs Report

Mortgage rates hit a yearly low after a weak jobs report drives U.S. Treasury yields down

A home available for sale is shown in Austin, Texas, on May 22, 2024. Brandon Bell/Getty Images

The two most popular mortgage rates in the United States have fallen to their lowest levels in over a year as a weak jobs report sent U.S. Treasury yields falling.

The benchmark 30-year fixed-rate mortgage, the most popular type of home loan, fell to 6.4 percent on Aug. 2, according to the MND Index, which tracks real-time changes in actual lender rates across America. This is the lowest level since April 13, 2023, when the 30-year fixed stood at 6.39 percent.

The rate on the second-most popular mortgage in America, the 15-year fixed, fell to 5.89 percent on Friday, per the MND Index. The last time the rate was close to this level was on May 12, 2023, when it was 5.95 percent.

The mortgage rate drops came as the Bureau of Labor Statistics (BLS) said Friday that the U.S. economy added 114,000 new jobs in July, a marked slowdown from June’s 179,000 and well below economists’ expectations of 175,000.

Besides the big miss in terms of job creation figures, the BLS report also showed the unemployment rate jumping from 4.1 percent to 4.3 percent in July, the highest level since October 2021. Consensus estimates predicted the unemployment rate would hold steady at 4.1 percent, with the downside surprise signaling a sharper-than-expected deceleration in the labor market, prompting investors to flee risky assets like stocks and seek refuge in the relative safety of Treasurys.

The dismal jobs report sent global stocks lower, while the flight for safety sent yields on the benchmark 10-year Treasury note falling by over 18 basis points, to 3.792 percent by around 3:45 New York time, according to Tradingview data, the lowest level since December 2023.

Mortgage rates, in turn, are closely tied to the yield on 10-year Treasury note, which moves inversely to price and so drops when demand grows.

Weekly data released on Aug. 1 by mortgage buyer Freddie Mac painted a similar picture. It showed that the 30-year fixed averaged 6.73 percent for the week ended on Aug. 1, down from last week when it averaged 6.78 percent.

The 15-year fixed-rate mortgage averaged 5.99 percent as of Aug. 1, down from the prior week’s 6.07 percent.

Sam Khater, Freddie Mac’s chief economist, said that falling mortgage rates are a positive sign for the housing market although economic uncertainty could temper any jumps in homebuying activity.

“Expectations of a Federal Reserve rate cut coupled with signs of cooling inflation bode well for the market, but apprehension in consumer confidence may prevent an immediate uptick as affordability challenges remain top of mind,“ he said in a statement. ”Despite this, a recent moderation in home price growth and increases in housing inventory are a welcoming sign for potential homebuyers.”

A prominent national index tracking U.S. homebuying activity showed that house prices rose to a new record high in May, although the pace of price growth slowed.

The latest S&P CoreLogic Case-Shiller U.S. National Home Price Index rose by 5.9 percent in May year over year, slower than the 6.4 percent annual jump in April.

“The waiting game for the possibility of favorable changes in lending rates continues to be costly for potential buyers as home prices march forward,” Brian D. Luke, head of commodities and real and digital assets for S&P, said in a statement.

Friday’s mortgage rate drop offer some hope for homebuyers facing affordability challenges.