Mortgage Rates Undergo One of the Biggest Single-Day Jumps: Report

A home is advertised for sale in New York City on March 31, 2021. Spencer Platt/Getty Images

Mortgage rates jumped by more than 0.25 percent on Oct. 4 after a government report showed that the labor market continued to remain strong.

The average 30-year fixed-rate mortgage rate jumped by 27 percentage points, to 6.53 percent from 6.26 percent, on Oct. 4, according to data from the Mortgage News Daily mortgage rate index that is updated on a daily basis. This is one of the biggest single-day rate increases that the index has ever tracked.

A strong employment situation indicates a more robust customer demand for mortgages, thus potentially keeping rates higher and lowering any chances of a rate decline.

The U.S. Bureau of Labor Statistics released its employment situation summary report for September on Oct. 4. The report shows that 254,000 new jobs were added last month, far exceeding the 140,000 jobs estimated by experts. This was also up from the 159,000 jobs added in August. The unemployment rate fell for the second consecutive month, to 4.1 percent from 4.2 percent. With the jobs report showing persistent strength in the labor market, mortgage rates surged.

Mike Fratantoni, chief economist at the Mortgage Bankers Association pointed out that the stronger-than-expected September employment report suggests a “successful slow landing” of the U.S. economy.

However, the report also stokes worries that inflation “may not move in a straight line to the Fed’s 2 percent target,” he said.

As such, the report “could certainly slow the expected pace of rate cuts,” Fratantoni said.

The Federal Reserve reduced its benchmark interest rates by 50 basis points last month in the first such rate cut since it started pushing up rates in 2022. The agency had also signaled an additional 50-point cut for this year.

Fratantoni noted that his association is forecasting longer-term rates, including mortgage rates, to “remain within a relatively narrow range over the next year.”

The positive employment report “will push mortgage rates to the top of that range, but we do expect that mortgage rates will stay close to 6 percent over the next 12 months,” he said.

Mortgage Rates and Housing Market

If mortgages were to start rising again, it could dampen an already cold housing market. In the first eight months of 2024, only 25 out of every 1,000 homes in the country changed hands, which is the lowest rate in at least three decades, according to a Sept. 30 statement by Redfin.

The real estate brokerage cited high mortgage rates as one of the key reasons for the low home turnover rate.

“More than three-quarters of mortgaged U.S. homeowners have secured a rate under 5 percent, well below the rates on offer this year,” it stated.

“This has prompted many homeowners to hold off on selling and buying another home using a higher rate, a phenomenon known as the ‘lock-in effect’. Rates fell to the low 6 percent range in August, but the drop has not yet resulted in a significant uptick in sales.”

Almost half of all U.S. homes for sale in August were on the market for at least 60 days, the highest share since August 2019, according to Redfin. Nearly seven out of 10 homes sat on the market for at least 30 days.

Redfin senior economist Sheharyar Bokhari pointed out that even though home sales usually tend to pick up when mortgage rates fall, the recent dip in rates has not triggered such a trend.

“[Instead], we are seeing the opposite—sales are dropping and homes are sitting longer on the market,” he said.

While the Fed’s rate cut in September will give buyers a confidence boost, “it remains to be seen whether sales will speed up in any meaningful way as we move into the slower Fall season.”

In a July interview with The Epoch Times, Dutch Mendenhall, founder of real estate investment trust RAD Diversified, suggested that buyers with the means to purchase a home go ahead with the decision rather than adopt a wait-and-see approach.

“If you wait, the home may be gone or the interest rates could go up again,” he said. “I believe eventually that loans will become more affordable, and at that point, homeowners can refinance to get the lower rates.”

Mary Prenon contributed to the report.