The average interest rate on the 30-year fixed-rate mortgage rose 27 basis points Friday morning following the release of the government's monthly jobs report. According to Mortgage News Daily, the interest rate is now 6.53%.
That's 42 basis points more than on September 17, the day before the Federal Reserve cut its key interest rate by half a percentage point. Mortgage interest rates are not based on the Fed's guidelines, but rather on the yield on 10-year US Treasury bonds.
When it comes to mortgage interest rates, what matters most is the Fed's next expectations. So there was a lot of anticipation in the run-up to this monthly report, as the last two pointed to weaker labor market conditions.
“In fact, the Fed's decision to cut rates by 0.50 versus 0.25 last month had a lot to do with the fear/expectation that there would be fewer reports like today's in the future,” wrote Matthew Graham, Chief Operating Officer at Mortgage News Daily. “The only saving grace here would be the idea that this is just a recent jobs report that has been mostly weaker, and that the next one may not be as damaging for bonds.”
However, the report shifts the outlook for future interest rates slightly, as most had expected the trend to be lower.
“The MBA forecast assumes that longer-term interest rates, including mortgage rates, will remain in a relatively narrow range next year,” Mortgage Bankers Association chief economist Michael Fratantoni wrote after the jobs report was released. “This news will push mortgage rates to the top of this range, but we expect mortgage rates to remain close to 6% over the next 12 months.”
Today's home buyers are very sensitive to interest rate changes as home prices continue to rise from last year's levels. Additionally, inventory on the market is still very low, which has only led to higher prices. Interest rates are a full percentage point lower than they were a year ago, but the real estate market hasn't seen much of a rebound yet.