Recent data from Mortgage News Daily reveals that mortgage rates have hit a new year-to-date low of 6.53%. The pressure on Federal Reserve Chair Jerome Powell to lower the Fed funds rate has increased, and the latest jobs report may provide the necessary justification for a rate cut. Historically, the bond market tends to anticipate the Fed’s moves, and while rates have reversed and increased in the past, for now, we are experiencing a fresh low in 2025.
Housing data with lower rates?
Why is it significant to push mortgage rates towards 6%? Previous housing data has shown improvements when rates were between 6.64% and 6%. It is worth examining the current data to see if this trend will continue for the third time since late 2022.
Recent performance of homebuilder stocks has been positive, with a 1% week-over-week increase and a 17% year-over-year growth in purchase application data for existing home sales. This marks consecutive weeks of positive data, with 14 weeks of double-digit year-over-year growth. The increase in new listings and low comparisons have contributed to this growth, and historically, approaching 6% rates have led to improved week-to-week data.
Currently, despite external factors like tariffs, the 10-year yield has not dropped below 4% this year, standing at 4.24%. Observing how the bond market reacts to potential labor data declines alongside stable inflation growth will be crucial. If mortgage spreads continue to improve and the 10-year yield approaches 4% again, reaching 6% this year could be a possibility.
Conclusion
Tomorrow’s PPI inflation report will provide insights into how the 10-year yield may react. Despite some Federal Reserve members expressing uncertainty about a rate cut in the upcoming meeting, the weak jobs report suggests otherwise. Economic growth scares have historically led to decreases in the 10-year yield, subsequently lowering mortgage rates. The current improvement in mortgage spreads indicates that even with rising yields, mortgage pricing remains stable.