Mortgage rates in the United States have hit a yearly low following a weak jobs report that caused U.S. Treasury yields to fall. The benchmark 30-year fixed-rate mortgage dropped to 6.4 percent on August 2, the lowest level since April 13, 2023. Similarly, the rate on the 15-year fixed mortgage fell to 5.89 percent, close to its lowest level since May 12, 2023. These declines are attributed to the Bureau of Labor Statistics’ report, which revealed that the U.S. economy only added 114,000 new jobs in July, well below economists’ expectations of 175,000. The report also showed the unemployment rate increasing to 4.3 percent, the highest level since October 2021.
The disappointing job creation figures and rising unemployment rate signaled a significant deceleration in the labor market. As a result, investors sought safer investments, causing global stocks to plummet and yields on the benchmark 10-year Treasury note to drop by over 18 basis points, reaching 3.792 percent, the lowest level since December 2023. Mortgage rates are closely tied to Treasury yields, and as demand for Treasurys grew, mortgage rates decreased.
Weekly data released by mortgage buyer Freddie Mac further supported the trend of falling mortgage rates. The 30-year fixed-rate mortgage averaged 6.73 percent for the week ending on August 1, down from the previous week’s average of 6.78 percent. The 15-year fixed-rate mortgage averaged 5.99 percent, a decrease from the prior week’s 6.07 percent. Sam Khater, Freddie Mac’s chief economist, stated that falling mortgage rates are a positive sign for the housing market, although economic uncertainty may dampen homebuying activity. Nevertheless, a recent moderation in home price growth and increased housing inventory are encouraging signs for potential homebuyers.
Despite the decline in mortgage rates, the S&P CoreLogic Case-Shiller U.S. National Home Price Index reported that house prices reached a new record high in May, although the pace of price growth slowed to 5.9 percent year over year, compared to April’s 6.4 percent increase. Brian D. Luke, head of commodities and real and digital assets for S&P, noted that the waiting game for favorable changes in lending rates continues to be costly for potential buyers as home prices continue to rise.
The drop in mortgage rates offers hope for homebuyers facing affordability challenges. However, it remains to be seen whether these lower rates will translate into increased homebuying activity, as consumer confidence remains uncertain. While falling mortgage rates provide an opportunity for potential buyers, other factors such as rising home prices and limited inventory may still pose challenges in the housing market.
