Mortgage Rates Pull Back From Three-Year High as Weak Jobs Report Shifts the Wind
U.S. mortgage rates hit a near-three-year high last week — then promptly caught a rare break. Freddie Mac data showed the 30-year fixed averaging 7.28% for the week ending October 1, up from 7.03% the prior week: the largest single-week jump in about four years and the highest reading since November 2023, marking a sixth straight weekly increase. The 15-year fixed rose to 6.60%.
The wind shifted on Friday, October 2. The September jobs report landed far below expectations: employers added just 29,000 jobs, less than half the 80,000–90,000 economists expected; the unemployment rate ticked up to 4.2% from 4.1%; and the prior two months' payroll gains were revised down by a combined 60,000. Wage growth cooled too, up just 0.1% on the month.
The soft jobs report was exactly what bond and mortgage markets wanted to see. The 10-year Treasury yield — the benchmark lenders price home loans against — fell to roughly 5.18%–5.21% on Friday morning, after touching 5.35% on Monday, its highest since April 2002. Traders rapidly unwound bets on another Federal Reserve rate hike this month, shifting to expectations of a hold.
Daily mortgage rate trackers followed, easing to their lowest in just over a week: the 30-year fixed sat around 7.31% APR on Monday, October 5, down 10 basis points from Friday, with top-tier borrowers seeing lower quotes. Lawrence Yun, chief economist at the National Association of Realtors, sees room for relief after what he called the recent "brutal rises" in rates.
Don't pop the champagne yet — a relative low is still an absolute high. Zillow's September market report showed newly pending home sales, a leading indicator of future closings, down 8.5% year over year, while the typical mortgage payment runs 6.7% higher than a year ago. In September, 20.8% of listings took a price cut, the highest share in four years — sellers are bending, but elevated rates keep many buyers locked out.
Two things to watch next: this week's Federal Reserve meeting minutes, and whether oil prices and inflation data keep cooling. Analysts say only sustained disinflation and a softer labor market will firm up expectations for Fed rate cuts — the precondition for mortgage rates to fall in any meaningful way.