In the weeks leading up to the Federal Reserve’s Oct. 28-29 meeting, mortgage rates saw a steady decline. However, there has been a recent shift as APRs have started to rise once again.
Following the release of new employment data indicating a strengthening labor market, the average rate on a 30-year fixed-rate mortgage increased by 17 basis points to a 6.18% APR for the week ending Nov. 6, according to information provided to BW by Zillow. One basis point equals one one-hundredth of a percentage point.
The recent decision by the Fed to lower the federal funds rate was widely anticipated, with several members of the Federal Open Market Committee publicly expressing their support for the cut.
Prior to the meeting, mortgage rates had fallen in anticipation of the Fed’s actions. However, the current rates reflect uncertainty about the future decisions of central bankers, particularly regarding the upcoming December meeting.
With more jobs in October, inflation may retake center stage
During a Fed meeting, central bankers typically have three options:
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Lower interest rates to stimulate employment.
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Raise interest rates in an attempt to curb inflation.
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Maintain current rates to await new data or to balance inflation and employment.
The October decision by the Fed was largely focused on improving the labor market, which had shown signs of weakness prior to the government shutdown.
Recent data from ADP revealed a modest rebound in employment, with private employers adding 42,000 jobs in October. However, the growth was described as modest compared to earlier reports this year.
This uptick in employment suggests that the Fed may shift its focus from unemployment to inflation concerns. This could impact future rate decisions.
Despite claims of low inflation by President Trump, a statement from the Treasury Borrowing Advisory Committee indicates that inflation remains above the Fed’s target of 2%. The statement also notes that unemployment is not currently a significant threat to the economy.
Looking ahead, it is likely that mortgage rates will continue to rise, with uncertainties surrounding future Fed decisions. However, the upcoming months are historically slower for real estate, potentially providing opportunities for negotiation on house prices.