Any hope of a trend reversal for mortgage rates seems to be DOA.
A cooler-than-expected jobs report this morning could have taken the pressure off.
But instead, it came in well above expectations, piling even more pain onto interest rates.
It also increased the odds of a September Fed rate hike to over 60%.
Perhaps solidifying the current high-mortgage rate environment, at least for now.
Mortgage Rates Don’t Get the Relief They Were Looking For
A cool jobs report for August could have been just the ticket to give mortgage rates a break.
Instead, the August payroll numbers blew the consensus out of the water, with 162,000 jobs created during the month versus about 53,000 expected.
In addition, there were upward revisions to the numbers for June and July, which were bumped up 11,000 and 44,000, respectively.
All said, that’s 160,000 more jobs created than expected over the past three months. It also turned the negative month of July positive.
Long story short, the labor market continues to show it’s “resilient,” while inflation continues to show it’s not over yet.
The combination has put upward pressure on mortgage rates, which tend to do well when the opposite happens.
Ultimately, if you want lower mortgage rates you need some combination of lower inflation and tepid employment figures.
We’re not getting either right now, so the trend will continue to not be our friend.
September Rate Hike Odds Move Above 60%
Meanwhile, the odds of a September rate hike rose above 60% on the hot jobs report, up from 49.4% a day earlier, per CME FedWatch.
That means the odds of a rate hike are now the most likely outcome, though these odds can swing wildly from day to day, as we can see.
And the federal funds rate is an overnight lending rate that has little to do with long-term 30-year fixed mortgage rates. Opposite end of the spectrum,
But Fed rate expectations can still play a role. If they’re expected to hike rather than cut, mortgage rates can front-run the move and inch higher.
So it’s yet another headwind for mortgage rates, or rather tailwind propelling them ever closer to 7%.
To make matters more “interesting,” President Trump has taken to his Truth Social platform to applaud the jobs numbers while saying a “strong country means a lower interest rate.”
And went on to threaten to “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT…”
This means more pressure on the Fed not to hike rates in September, especially with his pick Kevin Warsh leading the charge.
Are Mortgage Rates at the Top of the Range for Now?
I’ve been saying lately that despite the recent moves higher, and fresh 52-week highs achieved for mortgage rates, it has been incremental at best.
We’re talking a few basis points here and there, not big increases where rates rise .125% to .25% in a day or two.
The 30-year fixed is currently averaging around 6.875%, per Mortgage News Daily. And a lower 6.71%, per Freddie Mac.
While the numbers are up, they aren’t up significantly. The prior high for the 30-year fixed was 6.85% at the end of July, per MND.
And Freddie had rates at around 6.69% a month ago, so they’re just two basis points (0.02%) higher this week.
Similarly, 10-year bond yields aren’t moving much today in spite of the hot jobs numbers.
To sum it up, sure, rates are higher, but the move higher seems to be running out of steam, even with seemingly bad news like higher inflation and hot jobs reports.
Along with continued tensions in the Middle East and higher oil prices.
It tells you there might be a limit to how high mortgage rates can go, at least for now. Perhaps they are at the top of their range.
That’s the one silver lining right now in an otherwise bleak situation.
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