Mortgage rates remained flat following a jobs report on Friday that continued to show a cooling labor market.
Mortgage rate pricing for homebuyers hasn’t changed significantly as lenders have already priced in a Federal Reserve rate cut of 25 basis points (bps) that is expected later this month, loan originators told HousingWire.
Kevin Leibowitz, president of Grayton Mortgage, said he was quoting 6.125% for a 30-year conventional mortgage of $400,000 on Friday with no discount points.
“Rates were essentially unchanged from yesterday to midday today,” Leibowitz said. “A lot it is priced in. If the job reports were worse than it was, that would start having market players pricing in a 50-bps cut. That did not happen. That’s why we are not seeing much movement in rates.”
For the same 30-year loan of $400,000, a mortgage originator in Texas on Friday quoted 6.35% for a Federal Housing Administration (FHA) loan and 5.5% for a U.S. Department of Veterans Affairs (VA) loan with no points or buydowns.
“Since the 10-year U.S Treasury yield is at a 52-week low, I’d expect some slight pullback leading up to the Producer Price Index (PPI) on Thursday. Much will hinge on what the Fed decides in a couple of weeks,” the loan officer said.
The 10-year Treasury yield was 3.72% on Friday, dropping from this year’s peak of 4.7% in April. Fixed-rate mortgages often correlate with the 10-year Treasury yield.
“The 10-year Treasury yields are essentially flat, implying market sentiment is unchanged and the Fed cuts are priced into mortgage rates,” said Sam Williamson, senior economist at First American. “The very rate-sensitive housing sector remains sluggish due to the affordability constraints caused by record-high house prices and still-elevated mortgage rates.”
Ravi Patel, a branch manager at UMortgage, told HousingWire that mortgage bonds started Friday up 3 bps to 101.18. They moved up to 101.23 but remained somewhat flat throughout the day.
“Government rates (FHA, VA, USDA) are hovering around 6.25% with little to no discount points, and down to 5.75% with a slight cost to the borrower,” Patel said. “Some lenders have options for clients to get down to 5.25% with discount points near 2%. Conventional rates are still hovering in the mid- to low-6% range with little to no cost in discount points. Some lenders are pricing at 5.99%, with discount points in the 1% to 2% range.”
The average 30-year conforming mortgage rate was 6.52% on Friday afternoon at HousingWire’s Rates Center, down from 6.55% on Thursday afternoon.
“For rates to go lower, we need more economic data weakness, or the spreads start to improve after this latest move lower in rates today,” HousingWire Lead Analyst Logan Mohtashami said. “Around labor data, we can see some volatility. The inflation data isn’t as important as it used to be, but jobs week, the weekly jobless claims data and Fed President statements can move markets.”
Federal Reserve policymakers on Friday said they are ready to lower interest rates after their next meeting, Sept. 17-18, noting it is the right time to do so.
“It is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” New York Fed President John Williams said at a Council on Foreign Relations event. Williams remained tight-lipped on the size of the first rate cut and how fast the pace of cuts might be.
Fed Governor Christopher Waller gave a more aggressive stance.
“If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings,” Waller said, speaking at the University of Notre Dame. “If the data suggests the need for larger cuts, then I will support that as well.”
U.S. central bankers have left the federal funds rate unchanged in the range of 5.25% to 5.5% since July 2023. The CME Group‘s FedWatch tool on Friday showed that interest rate traders were leaning toward the Fed making a smaller cut, with 69% predicting a 25-bps decrease at the Federal Open Market Committee (FOMC) meeting in two weeks.
HousingWire Managing Director James Kleimann contributed to this report.
