There’s been a lot of movement in the market lately, and I wanted to break down what it all means for you. It’s been a truly eventful couple of weeks, with interest rates touching their best levels in 10 months and some fascinating news from the jobs report and inflation data. Here’s a quick look at what’s been happening.
The Good News: Rates Are Down
Last week, we saw some encouraging news as the 30-year fixed-rate mortgage dropped to its lowest level since April. According to Freddie Mac’s weekly survey, the average 30-year fixed rate was down by .09 percent as of August 7th. This decline sparked a surge in mortgage applications, with refinance activity hitting its strongest point in nearly four months, jumping 23 percent in one week alone! The purchase market also saw a slight uptick, a positive sign that lower rates are starting to bring more buyers back.
A big reason for this positive shift was the latest jobs report from the Bureau of Labor Statistics. The report showed fewer new jobs than expected and made significant downward revisions to the previous two months, erasing 258,000 jobs from what was previously reported. For the bond market, which drives mortgage rates, this “bad news” was actually good news. The jobs report signaled a potential slowdown in the economy, which led to a rally in bonds and, in turn, helped mortgage rates improve.
The Big Question: What About a Fed Rate Cut?
With the economy showing signs of slowing, the likelihood of a Fed rate cut in September has skyrocketed. After the jobs report, the probability jumped to nearly 90 percent. You might be thinking that a Fed rate cut is exactly what we need to bring mortgage rates down even further, but that’s not necessarily the case.
The bond market has already priced in the possibility of a rate cut. Plus, the last time the Fed began cutting rates, long-term rates like mortgages actually worsened. Why? The market feared that rate cuts would stoke inflation, and long-term bonds don’t like inflation.
This is a great reminder that mortgage rates don’t follow the Fed Funds Rate as closely as some people might think. Instead, they respond to longer-term economic indicators.
What’s Next?
This past week, the market was focused on the latest inflation data, specifically the Consumer Price Index (CPI). The report showed that inflation hasn’t fallen decisively enough to guarantee a rate cut, but it also didn’t rise enough to take one off the table. This mixed news caused longer-term bonds to hold steady, meaning mortgage rates remained roughly unchanged.
The main takeaway here is that while rates have improved, the market is still very sensitive. We’re watching to see if the recent soft job gains are a temporary blip or a sign of a broader slowdown. The market is currently at a key technical level, and for rates to improve further, we need to see a convincing move below this important threshold.
I’m here to help you navigate this dynamic market. Whether you’re considering a refinance to lock in a lower rate or you’re a prospective homebuyer, staying informed is the best way to make a smart decision.
Please don’t hesitate to reach out if you have any questions or want to discuss your specific situation. You can send me an email or call/text me at 818.307.6072.
