Mortgage rates drop to their lowest point in over a year following a week employment report.

• The weaker-than-expected monthly employment report caused bond yields to fall rapidly.
• Since late April, home sales have been declining following the recent high of 7.52% on the 30-year fixed mortgage.

On Friday, Mortgage News Daily reported that the average rate on the popular 30-year fixed mortgage decreased by 22 basis points to 6.4%, which is the lowest rate since April 2023. Additionally, the 15-year fixed rate also dropped to 5.89%, marking its lowest level since early May 2023.

The weaker-than-expected monthly employment report caused bond yields to fall rapidly, which in turn led to a decrease in mortgage rates.

On Wednesday, Federal Reserve Chairman Jerome Powell expressed his openness to multiple rate cuts in 2024, but this morning's sharply weaker jobs report, which Powell was unaware of on Wednesday, has led to a more aggressive rate cut narrative.

Graham stated that there are still two inflation reports and another employment report before the Fed's September meeting. If the Fed does not provide strong counterarguments to the recent data, the rate cut cycle will likely begin with a sense of urgency.

The 30-year fixed rate dropped dramatically from 6.81% to 6.37% in just the past five days, despite the recent high of 7.52% in late April. Home sales have been falling ever since, as buyers faced not just high interest rates but also high home prices and a lack of supply. Although supply has since improved, prices are still overheated.

In just a few months, the affordability of buying a $400,000 home with a 20% down payment and a 30-year fixed mortgage has significantly improved. In April, a buyer would have been facing a monthly payment of approximately $2,240, not including insurance and property taxes. Today, that monthly payment is about $2,000. Additionally, more buyers would now qualify for the loan at today's lower rates.

The Mortgage Bankers Association reports that mortgage applications for purchasing a home are currently running 15% lower than they were at this time last year. However, this latest decline could potentially stimulate demand.

Mike Fratantoni, the chief economist for the Mortgage Bankers Association, stated in a news release that the market is moving ahead of the Fed, causing long-term rates such as those for mortgages to decrease. This should result in an increase in home purchases and a pickup in refinance activity.