Mortgage rates saw their biggest daily plunge in over a year after data released Friday morning showed a fast-deteriorating labor market.
The 30-year, fixed-rate mortgage — a common choice for homebuyers — was down 16 basis points to 6.29% on Friday compared to a day earlier. It’s the largest daily drop since August 2024 and the lowest daily rate since October 2024, according to market data platform Mortgage News Daily.
Similarly, the 15-year, fixed-rate mortgage — a popular choice for homeowners refinancing their loan — fell 21 basis points to 5.6%.
“Many lenders are priced better than 10/3/24 at rates of 6.125%, and many lenders will be quoting in the high 5's today,” Matt Graham, chief operating officer of Mortgage News Daily, wrote on X.
Bad news for the economy is good news for mortgage rates
It’s good news for borrowers who have been waiting for lower mortgage rates, but it comes at the expense of growth elsewhere in the economy. On Friday morning, the Bureau of Labor Statistics reported that the U.S. labor market added just 22,000 jobs in August. That’s far from the anticipated 76,000-plus roles that markets expected.
Those figures affect investor mentality and the bond market, thus impacting mortgage rates, according to Graham.
“In general, weaker jobs numbers prompt investors to buy bonds. When investors buy bonds, the price of those bonds goes up. When bond prices go up, rates go down,” he wrote in a Friday blog post.
Put another way, “bad [economic] news is good news for mortgage rates,” Melissa Cohn, regional vice president of William Raveis Mortgage, told Homes.com in an earlier interview.
“It’s a strange concept,” she added, “but mortgage rates live in this very contrarian world."
Lower rates create an opportunity for homeowners to refinance
While the downward pressure on mortgage rates could pull some prospective homebuyers off the sidelines, it could also inspire homeowners to refinance their current, higher-rate loans.
Steve Trautwein, director of military lending at Intercoastal Mortgage, said that his phone had been ringing off the hook since Friday morning.
“It’s going to be a very busy weekend,” he told Homes.com in an interview. “It’s been a long time. A long time coming. But I look forward to 14-hour days on Saturday and Sunday.”
Bigger picture: Friday’s job data could be the nail in the coffin for a Federal Reserve interest rate cut later this month.
Though the central bank only sets short-term rates, not mortgage rates, its actions dictate investor behavior, in turn creating changes in the mortgage market. That said, it’s possible that mortgage rates fall further, but some lenders are cautiously optimistic, at best.
Jeff Ruben, president of WSFS home lending, suggested that concern about inflation could leave long-term interest rates, including mortgage rates, higher for longer, even if the Fed lowers its short-term interest rates.
"The way the 10-year [bond market] has been behaving, there is still real concern about inflation in the future,” he told Homes.com. “That's why they're demanding a higher rate for a longer term."
