What’s going on with mortgage interest rates?

Before Friday’s July jobs report, I was planning on writing a newsletter saying that we should expect the Federal Reserve to raise interest rates at its September meeting. But after seeing the July jobs report, neither I nor many other economists (who are smarter than me) are so sure.

The July jobs report from the Bureau of Labor Statistics came in weaker than expected. According to the BLS, the US lost 23,000 jobs, which was way off from economists’ estimates for the addition of 85,000 new jobs. Additionally, job growth for May was revised downward by 66,000 (from +129,000 to +63,000), and June’s figure was lowered by 37,000 (from +57,000 to +20,000). That is over 100,000 fewer jobs created than originally reported. So, this year’s strong job market may not be as strong as everyone thought.

Why does this matter for mortgage rates? Before Friday, many expected the Fed had no choice but to raise rates to fight stubbornly high inflation because the job market was so strong. But this report shows that is not the case. While the Fed does not set mortgage rates, it has an indirect influence on them. 30-year and 15-year fixed-rate mortgages follow the lead of long-term Treasury yields, which do respond to decisions on the federal funds rate.

So, while mortgage interest rates are still in the mid to upper 6s, at least for now it looks like we won’t see them climb to over 7%. If you would like to explore mortgage interest rates, please contact us.