tl;dr
Mortgage rates fell to 6.29% following a weaker-than-expected August employment report, marking the largest one-day drop since August 2024. The decline is attributed to market reactions to the jobs data, with lenders now offering rates in the high 5% range. The drop from May's peak of 7.08% could ...
Mortgage Rates Drop to 6.29% as Job Report Sparks Market Reaction
Mortgage rates took a significant dip on Friday, with the 30-year fixed mortgage rate falling 16 basis points to 6.29%, according to Mortgage News Daily. This drop followed the release of a weaker-than-expected August employment report, marking the lowest rate since October 3 and the biggest one-day drop since August 2024.
“This was a pretty straightforward reaction to a hotly anticipated jobs report,” said Mortgage News Daily Chief Operating Officer Matt Graham. “It’s a good reminder that the market gets to decide what matters in terms of economic data, and the bond market has a clear voting record that suggests the jobs report is always the biggest potential source of volatility for rates.”
Graham added in a post on X that many lenders are now “priced better” than they were on October 3 and would be quoting rates in the high 5% range.
The drop in mortgage rates is a major change from May, when the 30-year fixed rate peaked at 7.08%. This shift is significant for homebuyers currently in the market, especially given the high home prices.
For example, consider someone purchasing a $450,000 home, just above August’s national median price, using a 30-year fixed mortgage with a 20% down payment. Excluding taxes and insurance, the monthly payment at 7% would be $2,395. At 6.29%, that payment would be $2,226, a difference of $169 per month.
This might not seem like much to some, but it can make a significant difference in not only affording a home but also qualifying for a mortgage.
Homebuilder stocks reacted positively to the news, with companies like Lennar, DR Horton, and Pulte all rising roughly 3% midday. The homebuilding ETF ITB has been performing well over the past month as rates have slowly decreased. It’s up close to 13% in the past month.
The big question now is whether this drop in rates will be enough to bring homebuyers back into the market.
Mortgage demand from homebuyers, an early indicator, has yet to respond to the gradual improvement in rates. Applications for a mortgage to purchase a home last week were 6.6% lower compared to four weeks prior, according to the Mortgage Bankers Association.
“Homebuyers grapple with a lack of affordability, sellers contend with more competition, and builders deal with lower buyer demand,” said Danielle Hale, chief economist at Realtor.com, in a statement following the release of the August employment report. “These conditions haven’t spelled catastrophe, but have created a cruel summer for the housing market.”
Some analysts argue that buyers need to see mortgage rates drop to the 5% range before it really makes a difference. Home prices remain high, and although the gains have cooled, they are not yet coming down on a national level. Additionally, uncertainty about the state of the economy and the job market has left many potential buyers on the sidelines.