Mortgage rates increased for the seventh week in a row, rising 12 basis points according to the Freddie Mac Primary Mortgage Market Survey as of October 8th This rate is at a three-year high and marks the seventh consecutive weekly increase, pushing borrowing costs to their highest level since November 2023. Economists note that a combination of a global bond sell-off, persistent inflation expectations, and rising oil prices driven by geopolitical conflicts in the Middle East have heavily battered the bond market, directly sending consumer mortgage rates upward.
Mortgage applications decreased 4.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending October 2nd. “Mortgage rates moved to their highest level in almost three years last week as both Treasury rates increased and spreads widened with the increase in rate volatility,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “Very few homeowners have an incentive to refinance at these rates, and the jump in borrowing costs has caused many potential borrowers to step back from the purchase market. Added Kan, “Purchase activity decreased across all loan types as these higher rates add to ongoing affordability challenges for many homebuyers.”
US job growth slowed more than expected in September and the nonfarm payrolls count for the prior two months was revised sharply lower. The Labor Department’s closely watched employment report last Friday also showed the unemployment rate increased to 4.2% last month from 4.1% in August as more people entered the workforce. Economists said the report reaffirmed the labor market’s “low-hire, low-fire” state and likely had no impact on near-term monetary policy, with inflation remaining the key focus. “This is a disappointing jobs report and a reminder that the low-hire, low-fire labor market never went away,” said Olu Sonola, head of US economics at Fitch Ratings. “Weak job growth, a slightly higher unemployment rate, contained wage gains and downward revisions to earlier payroll estimates give the Fed little reason to keep an October rate hike on the table.”
Federal Reserve officials expect they will raise interest rates again before the end of the year to head off inflation that has run above target for more than five years, according to meeting minutes released Wednesday. But the meeting summary provided no indication of when specifically policymakers expected to raise benchmark rates, only that persistently higher prices and a stable labor market likely would lead to a second hike this year. The Fed next decides on rates on October 28th and then again on December 9th “With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the document stated.
